Escalating commerce frictions between the U.S. and China have a spread of companies and buyers in each international locations sweating, however some consider there stays a vibrant spot the place the antagonists can discover widespread floor — preventing environmental points.
One of them is the U.S.-China Green Fund, which does precisely because the identify suggests — financing tasks within the U.S. (and the west on the whole) and China that yield each monetary and environmental returns. The fund not too long ago closed its maiden fund of 3.7 billion yuan ($550 million) and has already began to lift a second and bigger yuan fund, it instructed TechSwitch.
“The U.S.-China Green Fund believes that cleantech and environmental products are a positive, apolitical sector of focus for U.S.-China cooperation,” mentioned Annie Zhou, the fund’s director of U.S. exterior affairs. “Currently, trade tensions have elevated some concerns from companies in both countries but have not affected our investments.”
With the contemporary capital, the agency will proceed to again corporations that might handle China’s environmental challenges, areas that it believes are far and distant from the sort of cybersecurity issues that underpin the present wave of bilateral tensions.
“We are looking for win-win opportunities — improving the environment in China, which will benefit the rest of the world and also help Western companies tap into large markets in China,” added Zhou.
In China alone, the fund has poured 2.8 billion yuan ($420 million) right into a portfolio of 13 corporations with the likes of a market for inexperienced dwelling home equipment serving greater than 300,000 households and an power efficiency service supplier that’s accomplished 100-plus tasks at public amenities like hospitals, motels and supermarkets.
AIpark attracts information from video cameras put in on the streets to mitigate site visitors congestion. Photo: AIpark
Aside from the extra typical classes of power effectivity and air pollution prevention, the fund additionally eyes expertise corporations that might profit the setting in much less apparent methods. One instance has been AIpark, a startup providing real-time parking maps that may finally mitigate congestion and thus CO2 emissions.
A US-China effort
The cross-border investor is one-of-a-kind. It was borne out of a landmark joint effort by enterprise leaders and diplomats from China and the U.S. — the world’s No.1 and No.2 carbon emitters — to construct a climate-resilient future following Chinese President Xi Jinping’s 2015 assembly with former U.S. President Obama. Some of the fund’s notable founders embrace Henry Paulson, former U.S. Secretary of the Treasury and founding father of the Paulson Institute, a suppose tank devoted to U.S.-China relations. The different essential founding member is China’s Office of the Central Leading Group for Financial and Economic Affairs, which is headed by Vice Premier Liu He and performs a key function in China’s financial policymaking.
Trade tensions apart, one other potential roadblock exists stateside for the fund: President Donald Trump’s withdrawal from the Paris Agreement and his denial of local weather change’s devastating results on the earth. But the inexperienced fund is hopeful that the President’s stance is not any object, for its focus goes properly past merely capturing carbon emissions.
“There is still a large number of companies in the U.S. working on technologies focused on improving the environment,” says Douglas Cameron, the fund’s senior managing director. “Clearly, climate change is a critical factor in our investment decisions, but a lot of the technologies that we focus on are important independent of one’s position on that topic. Clean air, water, and safer agriculture are all within our investment universe, and we believe that supporting companies and technologies that address these environmental challenges are key to sustainable development in China.”
Investment companions at U.S.-China Green Fund. Photo: U.S.-China Green Fund
The fund’s immunity from the commerce struggle will get one questioning whether or not it may very well be a channel to take advantage of loopholes and fund corporations in additional politically charged sectors. The agency dominated out the likelihood.
“That was never part of our consideration,” mentioned Zhou, who pressured that the agency’s twin mission is to “improve the bilateral relationship” on high of “addressing environmental pollution through market-oriented means and generating sustainable returns.”
Investment philosophies
The cross-border fund takes a two-pronged method. The route within the west is simple: Identify sustainable applied sciences that may profit China and make investments as a late-stage enterprise capital as a result of no matter answer it’s bringing into China ought to in all probability be confirmed. In return, these corporations can faucet the fund’s deep China know-how and expansive native connections, giving them entry to a market the place the likes of Uber and Google have struggled and remaining international gamers — Microsoft’s Bing and LinkedIn, simply to call two — should consistently parse Beijing’s altering and obscure guidelines.
To ramp up its deal-sourcing capabilities within the U.S., the China-based funding agency plans to open an workplace in Chicago by May, the place it’s going to present strategic and monetary advisory for corporations to enter the China market.
On the China aspect, the fund invests as a non-public fairness agency in corporations that will not appear environmental however “have strong channels to environmental markets and the ability to influence the environment.” The thought is that by backing well-oiled corporations near the supply of air pollution, the fund might affect their choices on, say, the extent of power effectivity in condo buildings and the sort of autos logistics corporations dispatch.
Some identifiable targets are corporations like Alibaba, which processes tens of thousands and thousands of supply orders daily. But the fund admits even a company with the extent of enterprise and authorities ties like itself might have a tough time shaking up the enormous’s observe.
Huitongda helps rural farmers promote their farm produce on-line. Photo: Huitongda
Instead, the kind of funding it favors is “getting in early before the company is quite as well-known, and then the Alibaba and others can perhaps come in afterwards,” mentioned Cameron. To that finish, the fund all the time tries to take a board seat in its Chinese corporations. One working example is Huitongda, a startup that gives rural retailers with merchandising and advertising and marketing instruments, producing 35 billion yuan ($5.24 billion) in revenues final yr. Alibaba chimed in with $717 million proper after the U.S.-China Green Fund made its provide.
When it involves selecting co-investors, the fund has been pally with monetary establishments like banks and insurance coverage corporations in addition to restricted companions, a lot of whom are additionally its strategic companions. Another strategy to collaborate is thru particular function funds. For occasion, Four Rivers was not too long ago set as much as restructure and improve the Chinese metal business after it raised roughly 5 billion yuan ($750 million) from the U.S.-China Green Fund, Chinese metal group Bao Wu Steel, China’s state-owned China Merchants Group, and WL Ross & Co, a non-public fairness agency run by the U.S. Secretary of Commerce Wilbur Ross. Venture capitalists are on its listing, too, because the inexperienced fund is keen to guess on early-stage, sustainability-focused startups with market potential in China, equivalent to Huitongda.
Working with officers
Despite its different hyperlinks to the federal government, the fund insists to make choices primarily based on market forces. Unlike many different buyers who’re eager to reap coverage rewards from areas like electrical autos, the agency avoids companies reliant on heavy subsidies. So if an organization desires the fund’s cash, it not solely must be inexperienced but additionally worthwhile.
Bai Bo, CEO of U.S.-China Green Fund / Photo: U.S.-China Green Fund
“Once we are in, we will then start urging [the companies] to think in a more sustainable way, but we think they can do that in a way that’s also economically profitable,” mentioned Cameron.
Where the federal government does come into play is their coverage affect on industries pertaining to the setting. That urges the fund to intently research the whims of Beijing.
“The government in China plays a large role in determining the success or failure of certain industries and even companies. Therefore, it is important to develop a good relationship and trust with the government and make sure they understand that you are helping to accomplish their goal,” steered Zhou.
The fund has, for example, suggested the town of Zhangjiakou on methods to ship a low-carbon Winter Olympics in 2022. The problem of working with officers just isn’t a lot their lack of appreciation for sustainability since a lot of them at the moment are tasked to implement environmentally-friendly insurance policies as a part of China’s nationwide purpose to go inexperienced. The greater concern is the excessive turnovers of officers — successors might are available in with a brand-new agenda and drop their predecessors’ objectives.
“However, if you meet the right officials, you may be surprised at their genuine concern for their constituents and projects and how quickly they can push to implement certain projects or policies,” Zhou asserted.

The article was up to date with the proper spelling of Annie Zhou’s identify. (March 2, 2019, 1:30 am)