In December 2023, Sequoia Capital, leading the initiative in collaboration with other members of the Carbon Neutral Alliance and various well-known financial institutions, announced the establishment of a Carbon Neutral Fund company to issue private equity funds, with an initial scale of approximately 20 billion.
Recognizing the common goal of sustainable human resource development and the trend of green investment for long-term value investment, the Carbon Neutral Fund will focus on and support the green transformation and upgrade. The funds will primarily be invested in clean energy, green technology innovation, energy conservation and carbon reduction, corporate green investment, and information and digitalization.
Understanding the green investment trend and envisioning the development of the "Carbon Neutral Fund":
In the practice of reaching peak carbon and carbon neutrality, green finance plays a crucial role. ESG (Environmental, Social, and Governance) responsible investment, driven by values, advocates for value and sustainable development investment. It is long-term in nature and is an important engine to promote green investment and effectively support green and low-carbon development.
According to public data, it is expected that by 2025, China's total ESG investment will reach 20-30 trillion yuan, accounting for 20%-30% of the total scale of the asset management industry. The global ESG investment scale will reach 50 trillion USD. ESG investment will continue to receive attention worldwide and is expected to achieve rapid development.
Currently, global investment is focused on China's green economic development, with more and more international capital being invested in green enterprises, green technology innovation projects, and industrial development. Leveraging green financial support policies, the Carbon Neutral Alliance is committed to "creating enterprise decarbonization." It has established a development philosophy that drives both "service-oriented" and "guidance-oriented" green finance models. Focusing on the cross-temporal resource allocation function of green finance, it provides services such as information sharing, policy support, and resource integration, strategically assisting enterprises and individuals to better participate in carbon neutrality actions. By building a financial platform and vigorously developing green finance, the Alliance assists in creating "Energy Investment Industry Funds," providing financial support for the transformation of scientific and technological achievements, industrial project implementation, and aiding the development of member companies.
Facing the trend of green industry development, the Carbon Neutral Alliance has identified the investment opportunities in the blue ocean of the green economy and proposed the concept of the "Carbon Neutral Fund" project. The platform believes that the significance of establishing the Carbon Neutral Fund lies in using capital with depth and breadth to cover and support the development of the green industry. It aims to use large-scale capital operations to invest in and support outstanding projects and enterprises that possess key green and low-carbon core technologies and have industry influence, thereby promoting the development of green and low-carbon enterprises.
This initiative is not only an important measure for the Carbon Neutral Alliance to help the country achieve its carbon peak and carbon neutrality strategies, but it also reflects the Alliance’s commitment to its mission as a specialized platform supporting innovation, entrepreneurship, and industrial transformation and upgrading
Sequoia Capital, as one of the early investors in the ESG (Environmental, Social, and Governance) responsible investment field, is accelerating its support towards green industries, institutional platforms, and enterprises with long-term development prospects. Junfeng Li, investment partner at Sequoia China and Dean of the Sequoia Carbon Neutrality Research Institute, has emphasized in public speeches the undeniable responsibility of both corporations and financial institutions in sustainable development. He advocates that driving sustainable development for all businesses is a crucial direction that requires the joint efforts of the real economy and financial capital. Implementing ESG comprehensively in all aspects of sustainable development necessitates cooperation and effort from both sides to truly embody the ESG philosophy and promote valuable sustainable development.
In December 2023, led by Sequoia Capital and in partnership with other members of the Carbon Neutral Alliance and various renowned financial institutions, it was announced that a Carbon Neutral Fund company would be established to issue private equity funds, with an initial scale of about 20 billion. The formation of a 20 billion green fund by Sequoia Capital is a recognition of the professionalism of the Carbon Neutral Alliance team by many investment institutions and teams, as well as a unanimous recognition of the future direction and prospects of green investment. The popularity of the Carbon Neutral Fund among numerous capitals and members is attributed to the deep foundation that the Carbon Neutral Alliance has already established in the field of dual-carbon development, as well as its comprehensive research and investment experience in carbon peaking and carbon neutrality areas such as energy conservation, environmental protection, photovoltaics, wind power, and energy storage.
Focusing on sustainable development, the Carbon Neutral Fund is concentrating on five key investment areas: clean energy, green technology innovation, energy conservation and carbon reduction, corporate green investment, and informatization and digitalization. In addition to direct investment, the Carbon Neutral Fund will also collaborate with investment institutions that have excellent performance and experience in the green and dual-carbon field to establish sub-funds, attracting more social capital to increase investment in the green industry. This move aligns with China's green investment funding sources gradually becoming more diversified and the policy encouragement of green financial capital entering the green industry, aiming to alleviate the funding shortfall in China's economy and green transformation.
Clean Energy: The "Global Energy Investment 2022" report published by the International Energy Agency (IEA) indicates that from 2015 to 2020, global investment in clean energy increased by only 2% annually. However, since 2020, annual growth in green investment reached 12%. In 2022, clean energy investment exceeded $1.4 trillion, accounting for nearly three-quarters of the total increase in energy investment. With its green structural advantages, China is increasingly becoming a pillar in the global clean energy transition, demonstrating a leading role in fields such as clean energy technology innovation, equipment manufacturing, and value chain optimization. Currently, Chinese startups attract over one-third of the world’s early-stage energy venture capital, presenting a highly promising investment prospect.
Green Technology Innovation: As China's green development strategy deepens and the external effects of carbon emissions become increasingly apparent, such as the potential sharp rise in carbon prices, carbon tax collection, and the gradual implementation of green finance incentive policies, green projects are expected to yield higher long-term returns. Deep participation in equity (PE/VC) investments is anticipated to play a significant role in achieving China's carbon neutrality. Promoting green development requires the introduction of large-scale, long-term equity investments in green transformation, green technology, and green industry development. This approach will capitalize on the shared risks and benefits of equity investments to promote technological innovation and the transformation of achievements in green development.
Corporate Green Investment: Green investments by companies not only bring about favorable environmental reputations and differentiated products, thereby aiding in better market penetration in the "green" market, but also reduce material and energy usage costs, capital costs, and labor costs for enterprises, thus yielding green profits.
Driven by a long-term value investment perspective, Carbon Neutral Alliance is dedicated to pursuing global sustainable resource development. The Alliance firmly believes that the relationship between green investment's social contribution and economic benefits is not mutually exclusive but rather a symbiotic and mutually reinforcing one. The goals of achieving peak carbon and carbon neutrality are expected to promote advancements in green technology, inevitably leading to new investment opportunities. The Carbon Neutral Fund will inevitably focus its investments around the value development of green industries.
Looking to the future, Carbon Neutral Alliance intends to use the Carbon Neutral Fund as a link to closely unite investors, investment companies, strategic partners, and other resources. Keeping abreast of technological development trends, the Alliance plans to integrate resources, manage investment projects and risks effectively, and continually optimize the fund and investment layout. The goal is to channel development momentum and capital to technology companies, green companies, smart enterprises, and ESG enterprises that genuinely possess competitive barriers. This strategy aims to enhance the value for businesses and realize value for investments, achieving both social and economic benefits.