The lure of clean investment
Updated: 2007-09-06 06:26
Talking to Ye Dong about China's environmental problems, you almost get the impression that he enjoys being in the middle of one of the world's worst cases.
It's the dialectics of economics - when it's the worst time to get a service, it's the best time to invest in its supply. Ye is a pioneer in the area of turning care for the environment into a business.
And as managing partner of the nation's only specialized environmental venture capital management company, he is reaping the harvest of fundraisers' business plans. "Sometimes we get more than 100 business plans in a single day," he tells China Business Weekly.
When it started, Tsing Capital received just a few dozen business plans from fundraisers in a year, Ye says.
Environmental projects have become the third-largest investment area for venture capital in China - more or less the same proportion as in the United States. There is also marked improvement in the quality of more recent business plans, Ye says.
His company, Tsing Capital (formerly China Environment Fund), calls itself a clean-tech investor, but it invests in high-growth companies in all environmental fields. And as the central government places more emphasis than ever on energy conservation and emission control, it has just finished raising its third fund from global investors.
"It's a much larger one," Ye says, comparing the $150 million fund to the company's first fund in 2002 of only $13 million, and its second in 2004 of $30 million.
As an environmental venture capital management company, Tsing Capital is doubly enticing to investors, combining China's high-growth economy and its need for environmental care.
Much of the environmental industry in China and other countries is government-led, he says. And while Ye says he is pleased to see the government playing a leading role, as an investment manager Tsing Capital's preference is market-driven companies.
Entrepreneurial passion is essential to success in any industry, adds Patrick Tam, Tsing Capital's general partner.
The company played a part in the initial public offerings (IPOs) of Environmental Services Group based in Hong Kong, which outsources environmental solutions and provides pest control services, and two solar energy companies: China Sunergy in Nanjing and Jiangxi LDK in East China's Jiangxi Province.
Now it has a range of projects under way, from waste control and energy management (helping companies to save on their electricity bills, for instance), to alternative building materials.
Tsing Capital is good at working with early and growth-stage companies, Ye says. As well as the successful IPOs, it has also been involved in the sale of projects to larger international companies.
There will be more food-related proposals for venture capital in the future, according to Ye, from organic fertilizers and pesticides to the treatment of waste cooking oil.
And this should be the response as society becomes more aware of food safety and the government is more willing to tighten and enforce the rules, he says.
While IT-oriented venture capital tends to focus on large cities, Ye says environmental investment projects are more widespread and are sometimes directly involved in the development of rural areas.
Environmental solutions also tend to be more issue- and condition-specific, says Ye, and intellectual property is less straightforward than for IT-oriented venture capital.
Tsing Capital was set up in 2001 by investment professionals in association with Tsinghua University, one of the best engineering schools in China, at a time when IT was still the focus for venture capital.
The first fund under Tsing Capital was joined by Hong Kong's LESS group, the Asian Development Bank and a group of foreign financial institutions focused on clean technology investment. LESS has since remained an active supporter of Tsing Capital's funds, says Patrick Tam.
(China Daily 09/06/2007 page58)
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