In a significant development, the European Investment Bank (EIB) and the State Bank of India (SBI) have launched a new initiative of €100 million (~$121.63 million) for climate action and sustainability financing.

The official announcement to this effect was made at the European Union (EU)-India leaders’ meet in Portugal.

This is one of the first private equity operations by EIB in India. The Neev Fund II is a result of the commitment of EIB and SBI to support the country’s climate action and sustainability goals.

As per the arrangement, Neev Fund II will invest up to €100 million (~$121.63 million) in small and medium enterprises (SMEs) across the country. Financing will be provided to companies offering solutions for clean energy, electric vehicles, efficient use of raw materials, and water and circular economy projects in the country.

The fund will help emerging Indian companies invest in their growth through equity and quasi-equity arrangements. The funding will target the sectors that support the United Nations’ sustainable development goals.

Commenting on this latest development, EIB Vice President Christian Kettel Thomsen said, “Climate change claims thousands of lives and causes damage amounting to hundreds of billions of euros every year. Innovative solutions often require innovative forms of financing, such as private equity funds. Our partnership with the SBI will create a much-needed source of equity financing for climate action and environmental sustainability solutions offered by innovative SMEs. Saving our planet from climate change requires an all-hands-on-deck approach, and the EIB is proud to have found an ally in SBI ready to deploy innovative financing solutions for global climate action.”

The partnership is expected to lay the foundation stone for strategic collaboration between India and Europe, reinforcing climate action and environmental sustainability both in Indian and globally. It will also help strengthen the country’s SMEs and contribute toward long-term and sustainable economic development.

Speaking on similar lines, Chairman of SBI, Dinesh Khara, said, “SBI’s core ethos of financial inclusion and social development underpins its commercial activities and is reflected in its decision to invest in Neev Funds. Neev Fund II will provide equity to SMEs, focusing on mitigating climate risks, promoting social development, job creation, and gender equality at scale. I believe the cooperation of the two institutions, the EIB, which is one of the world’s largest climate finance providers, and SBI, India’s largest financial institution, will further strengthen and deepen the bond between India and the EU.”

The investment is being provided under the EIB’s Climate Action and Environment Facility, established to support projects aiming to reduce greenhouse gas emissions support environmental sustainability.

In May last year, the European Commission’s Innovation and Networks Executive Agency and the Indian Department of Science and Technology called for proposals that would use existing local energy systems to speed up decarbonization and reduce clean energy costs.

Earlier, EIB had confirmed that it would increase its investment in the onshore wind through the expansion of an existing lending program with the SBI. The EIB had also approved a credit line with YES Bank to accelerate private investment in wind and solar energy projects.

As a part of EIB’s long-standing commitment towards the renewable energy sector in India, the investment bank had approved funding of €800 million (~₹61.3 billion) for renewable energy investment across India even back in 2017.