Sustainable Living Thesis

Sustainable Living

Investment Thesis

By Anish Sood, Badri Pillapakkam, Roopa Kudva, and Sushant Kumar

About the Authors

Anish Sood

Consultant, Omiydar Network India

Badri Pillapakkam

Partner, Omidyar Network India

Roopa Kudva

Managing Partner, Omidyar Network India

Sushant

Kumar Director, Omidyar Network India

Special thanks to:

Aaina Duggal and Rohan Vyavaharkar

About Omidyar Network India

Omidyar Network India is an investment firm focused on impact. We partner with bold and purpose-driven entrepreneurs who are working to improve the lives of India’s Next Half Billion or the NHB. The NHB refers to the 500 million first-time internet users who have come online in the five years from 2018 to 2022. They represent the second big wave of internet users in India, hence the term “Next”.

To drive empowerment and impact at scale, we work with entrepreneurs in the private, public and non-profit sectors, who are tackling India’s hardest and most vital problems.

We invest in the areas that are critical for creating holistic impact for the NHB - Advancing Cities, Digital Society, Education & Employability, Emerging Technologies, Financial Inclusion & Wellbeing, and Property Inclusivity.

To learn more, visit www.omidyarnetwork.in, and follow us on LinkedIn (Omidyar Network India) and on Twitter (@on_india).

Executive Summary

At Omidyar Network India, our purpose is to invest in bold entrepreneurs who help create a meaningful life for every Indian, particularly the Next Half Billion (see below). The current climate related challenges pose an escalating threat. While some areas such as renewable energy, mobility, and circular economy are receiving greater attention from investors, we felt a need to establish a test portfolio of investments which focuses on the relatively underserved areas under “Sustainable Living . This document lays out our initial investment thesis for Sustainable Living - we will refine and update it as we understand and invest in this space more.

The Next Half Billion are Disproportionately Impacted by Climate Change

The Next Half Billion, or the NHB, are core to our work at ONI. They constitute the 500 million first-time internet users that have come online via their mobile phones in the five years between 2018 and 2022, and represent the second big wave of internet users in India. The NHB are mainly from the bottom 60% of India’s income distribution, and their fortunes will define India’s trajectory of growth, well-being, and prosperity in the decades to come.

While developing countries are more fragile and vulnerable to climate change, a disproportionate impact is felt by the NHB:

~170 million low-middle income Indians reside within 50 km of the coast1. With rising sea levels, over 35 million people face risk of displacement annually.2

60% of Indian farming is still rainfed, leading to over ~260 million farmers being dependent on monsoons for irrigation.3 As monsoon patterns get disrupted, income and livelihoods of these farmers are at risk.

The Indo-Gangetic plain is one of the world’s most densely populated areas (~ 00 million). As the Himalayan glaciers melt, the lives and food security of these people are at risk with climate change induced severe flooding and extreme droughts.

India recorded extreme weather events on 2 1 of the 273 days tracked in 2022. 5 Lower income populations are at climate risk twice over – not only do they account for the most casualties when climatic disasters strike, they also suffer income losses due to increased heatwaves, droughts, flooding, air pollution, and other extreme weather events.

A “Sustainable Living” Lens for a More Holistic Approach

A “Sustainable Living” lens expands attention beyond the current focus on Greenhouse Gas (GHG) emissions and spotlights additional challenges that are crucial in building NHB resilience to deal with climate change. Using this lens, the agenda becomes more wide-ranging and includes the following:

M t gat on: Reducing GHG emissions to minimise / mitigate climate impact for the NHB

Adaptat on: Building resilience to extreme weather events and developing a survival toolkit for a warmer planet

B od vers ty Loss: Preserving natural assets such as forests, water bodies, wildlife, oceans, etc., that are sources of critical livelihood for the NHB

Amb ent Env ronment: Environmental concerns not related to GHG emissions/global warming e.g., PM 2.5 pollution, acidification of ground-water, soil fertility reduction, etc.

Currently, amongst the above, mitigation receives the most attention and even within that energy and mobility are seeing the greatest activity and receive significant funding. Our approach, therefore, is to focus on other currently under-funded areas.

Additionally, as we looked at the landscape of activity, we observed significant emphasis and expectations on individual climate change efforts and specific thematic areas, but relatively lower focus on building an enabling and supportive infrastructure including data, knowledge, and policies. Also, while new ideas and pilot projects do exist in this space, there has been inadequate commercially viable innovation, with a particular void between Minimum Viable Product (MVP) and Product Market Fit (PMF).

We therefore believe that to enable strong action on climate change, it is equally important to build a robust ecosystem that supports the Sustainable Living agenda.

ONI Investment Thesis and Areas of ocus

Our thesis is that a Sustainable Living lens will help broaden the investment focus from GHG emissions and positively impact the climate agenda to minimize the effects of climate change on the NHB.

Accordingly, our investments will have a two-pronged approach, focusing on nascent/relatively underfunded themes as well as helping to build the ecosystem.

Nascent Relatively Un erfun e Areas: While there are many potential areas/themes for investment, we have narrowed down the areas of our focus, based on their relevance to NHB, potential for multiplier effects, and tech and market maturity. We picked the following two areas which have the potential to be highly catalytic-

Air quality

Sustainable ocean economy

Buil ing the Ecosystem: We identified the following cross-cutting areas which are foundational in nature and essential for healthy sector-level development. These will help provide a supportive environment for the sustainable living agenda-

Strengthening institutional capacity by levering and creating open data infra and standards

Addressing the “missing middle” of capital availability to make firms ready for venture capital — seeding springboards

Our Investment Thesis

At ONI, our purpose is to invest in bold entrepreneurs who help create a meaningful life for every Indian, particularly the Next Half Billion. The current climate related challenges pose an escalating threat, impacting each and every Indian, especially the Next Half Billion.

While some areas like renewable energy, mobility and circular economy are receiving greater attention from investors, we felt a need to establish a “test portfolio” of investments which focuses on the relatively underserved areas under Sustainable Living.

The Next Half Billion are Disproportionately Impacted by Climate Change

The Next Half Billion, or the NHB, are core to our work at ONI (learn more about the NHB). They constitute the 500 million first-time internet users who have come online via their mobile phones in the five years between 2018 and 2022 and represent the second big wave of internet users in India. The NHB are mainly from the bottom 60% of India’s income distribution (Fig. 1), and their fortunes will define India’s trajectory of growth, well-being and prosperity in the decades to come.

Rich

Middle Income

Aspirers

Small business owners like beauty salons and kirana shops, blue collar workers, domestic help, security guards, etc.

Deprived

Small farmers, rural artisans

Rich

Middle Income

► ►

Annual Household Income above INR 700K (above ~$8.7K)

Annual Household Income between Rs. 290K and Rs. 700K (~$3.6K $8.7K)

20M households (7% of the population),

► ►

98M people

Aspires

98M households (33% of the population),

462M people

Deprived

► ►

Annual Household Income between IN R 150K and Rs. 290K (~$1.9K $3.6K)

Annual Household Income below Rs. 150K (Below ~$1.9K)

121M households (39% of the population),

► ►

546M people

61M households (21% of the population),

294M people

Note: We’ve anchored the Deprived definition on World Bank’s 2011 global poverty line (<$1.9 per person per day in 2011 PPP) and the Aspirers definition on the low income line ($3.2 per person per day in 2011 PPP). We have used $9 per person per day in 2011 PPP as the Middle Income threshold, which aligns with CMIE (2018) data

Figure 1: The Next Half Billion

The fact that we currently face an existential threat due to climate change has been increasingly recognised globally. Developing countries, such as India, are more vulnerable to climate change, and even within India, the NH B are disproportionately impacted by this threat, due to reasons such as:

1. Rising Sea Levels:

With a coastline of 7,500 km, India has ~170 million low-middle income people who reside within 50 km of the coast.1 With rising sea levels, over 35 million people face risk of displacement annually2, while coastal biodiversity has already started getting affected, with over 30% of all fish species under significant threat of depletion3 (leading to domino effects on their ecosystems).

2. Disruption of Monsoons:

60% of Indian farming is still rainfed, leading to over ~260 million farmers being dependent on monsoons for irrigation3 . Due to climate change, Indian monsoons are becoming more erratic, with swings between extreme rain and droughts, which has left ~60% of rural districts at a ‘high to very-high’ risk of adverse impact from climate change7 . As monsoon patterns get disrupted, incomes, and livelihoods of these farmers are at risk, along with supply of fairly-priced produce to lower-income families.

3. Melting Glaciers:

The Indo-Gangetic plain is one of the world’s most densely populated areas (with ~400 million residents). As the Himalayan glaciers melt, the lives and food security of these people are at risk, with exposure to climate change-induced severe flooding and extreme droughts4.

4. Extreme Weather Conditions:

Climate events costed India

$7.6 billion in losses and damages in 2021 8 . The frequency and quantum of these events is expected to increase, as India recorded extreme weather events on 241 of the 273 days between January 1 and September 30, 2022 5 . While these events affect all Indians, the lower income populations are at climate risk twice over. Not only do they account for the most casualties when climatic disasters strike, they also suffer income losses due to increased heatwaves, droughts, floods, air pollution, and other extreme weather events.

A “Sustainable Living” Lens for a More Holistic Approach

The current global discourse predominantly revolves around climate change "mitigation" through Greenhouse Gas (GHG) emissions reduction. Within mitigation, energy and mobility are seeing the greatest activity and receive significant funding (Fig. 2). Through our Emerging Technologies and Advancing Cities initiatives, we, at Omidyar Network India, are already investing in some critical themes such as climate smart agriculture, low emissions mobility, climate resilient cities, and circular economy.

Source: Sources of GHG emissions from Rhodium Group, 2022; % are rounded; Climate finance capital allocation from Climate policy initiative, 2022 Note: Climate finance numbers are for 2022 and include private, individual and government spending, and equity, debt and grants instruments

Figure 2: The global discourse is dominated by climate change ‘mitigation’ (GHG emissions reduction), and the action is focused on energy and mobility (43% of the problem)

A ‘Sustainable Living lens expands attention beyond the current focus on GHG emissions and spotlights additional challenges that are crucial in building NHB resilience to deal with climate change

Using this lens, the agenda includes the following:

Mitigation: Reducing GHG emissions to minimise/mitigate climate change impact for the NHB

Adaptation: Building resilience to extreme weather events and developing survival toolkit for a warmer planet

Biodiversity loss: Preserving natural assets such as forests, water bodies, wildlife, oceans, etc., that are sources of critical livelihood for the NHB

Ambient environment: Environmental concerns not related to GHG emissions/ global warming, such as PM 2.5 pollution, acidification of ground-water, soil fertility reduction, etc.

Adaptation to Climate Change

Building resilience to extreme weather events and developing survival toolkit for a warmer planet

Mitigation of Climate Change

Reducing GHG emissions to minimize/mitigate climate change

3

Biodiversity Loss

Preserving natural assets such as forests, water bodies, wildlife, oceans etc.

Ambient Environment

Environmental concerns not related to GHG emissions/global warming e.g., PM2.5 pollution, acidification of ground-water, soil fertility reduction, etc.

Figure 3: India needs to “branch out” beyond mitigation and take a more holistic lens to sustainable living, incorporating climate adaptation, biodiversity loss, and environment.

Note: Framework is derived from the economic concept of “Doughnut economy” by Kate Raworth, (https://www.kateraworth.com/doughnut/) and other frameworks, including the policy ecosystem in India (e.g., the Ministry of Environment, Forests and Climate Change has workstreams across these 4 categories)

Additionally, as we looked at the landscape of activity, we observed significant emphasis and expectations on individual climate change efforts and specific thematic areas, but relatively lower focus on building an enabling and supportive infrastructure including data, knowledge and policies.

Also, while new ideas and pilot projects do exist in this space, there has been inadequate commercially viable innovation, with a particular void between Minimum Viable Product (MVP) and Product Market Fit (PMF).

We therefore believe that to enable strong action on climate change, it is equally important to build a robust ecosystem that supports the Sustainable Living agenda.

1. Strengthening Institutional Capacity:

There is a need to bolster capacity of regulators, in terms of both technical know-how and capital, in this rapidly evolving space to champion bold and innovative ideas and solutions. The focus of regulators also needs to move beyond themes such as clean energy to take a more holistic view of climate change and how to address it.

2. Leveraging Data:

To foster data-led action and innovation in sustainability, it is important to build digital infrastructures and data platforms. We currently lack frameworks and standards to assess environmental impact and drive innovation, and need a robust green taxonomy.

3. “Missing Middle” of Capital Availability to Make Firms VC Ready:

There exists both a sector and stage concentration in the current investments by VCs. 80% of equity is confined to clean energy and mobility which contributes only 45% to GHG emissions9 , and a ‘missing middle’ of support in the Pre-VC stage inhibits testing at scale and making businesses investor ready.

This would require:

Our Investment Thesis and Areas of Focus

Nascent/Relatively Underfunded Areas:

While there are many potential areas of investment, we prioritised two areas, based on their relevance to the NHB, potential for multiplier effects, and maturity of tech and the market.

1. Air Quality

The NHB are most vulnerable to poor air quality, with consistent exposure leading to adverse intergenerational health and life outcomes.

We see investment opportunities across a range of models, from supporting augmentation of institutional capacity to catalysing low-cost monitoring and deeptech solutions for air quality management. Investing in research and regulatory capacity will help educate, inform, and influence people and governments for better decision making. Some examples of the models that we look to back in this space are:

Ma ket Inf ast uctu e and Resea ch fo Ai Quality Monito ing and Management at Scale:

Building low-cost air quality monitors; analytics platform for national air quality Solutions that enable carbon capture at source

Tech Solutions to Reduce Ai Pollution: Technical and Implementation Suppo t fo Ai Quality Imp ovement:

Entrepreneurs working with Urban Local Bodies (ULBs) and governments to better implement air quality improvement initiatives

2. Sustainable Ocean Economy

15% of the Indian population lives on the coast1 . These individuals are mostly from the NHB. If we invest in solutions that create a sustainable ocean economy, we could prevent the migration of 35M+ people2 . This would also check climate change as oceans are the largest carbon sinks with the declining marine ecosystem releasing ~1Bn ton of CO2 /year10 .

We see opportunities for tech-led/enabled solutions to drive change in fishing and produce management. There is also room for data platforms to enable evidence-based policies along with commoditisation of ocean assets through tech-enabled market development and supply chains. Some examples of models we look to back in this space include:

Ent ep eneu s and O gs Wo king with Policymake s and Investo s to Build Coastal Resilience:

Ocean focused nature-based solutions that build resilience and minimise coastal flooding

Tech-Led Solutions fo Sustainable Livelihoods f om Oceanic Commodities:

Models that enable small scale fisheries to access global markets, encourage sustainable fishing/ seaweed cultivation etc.

Building the Ecosystem:

We identified the following cross-cutting areas which are foundational in nature and essential for healthy sector-level development. These will help provide a supportive environment for the sustainable living agenda.

3. Open Data Infra and Standards

Addressing data gaps and making data usable for decision making can significantly spur action. Out of the 122 cities that submitted a clean air plan under National Clean Air Programme (NCAP) in 2020, only 25% discussed the source of pollution and only 50% spoke about transportation and road dust11. To foster data-led action and innovation in sustainability, it is important to build digital infrastructure and data platforms such as a water availability atlas, a soil quality atlas, monitoring sources of air pollution, detailed risk assessment by regions, etc.

Robust frameworks and standards to assess environmental impact can drive innovation. India needs a robust green taxonomy, i.e., the definition of all environmentally hazardous activities and their impact. Available global frameworks such as Task Force on Climate-Related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB), etc., can be adapted for India.

There are opportunities for platforms to be built on top of existing public/market data platforms (such as the National Data and Analytics Platform (NDAP), Sustainability reporting for funds, etc.). These platforms would lead to a culture of more data driven decision making and prevent greenwashing.

Some examples of models we are looking to back in this space are:

nvironment and Sustainability Data Infrastructure:

Platforms on environment intelligence that track air quality, soil, micro weather, pollen, etc., for private and government applications

Sustainability Reporting Standards:

Sustainability reporting frameworks, including collaborative initiatives with platforms such as International Institute of Conservation (IIC) and Sustainability Accounting Standards Board (SASB)

Tech for Compliance and Regulation:

Solutions that will increase adoption and strengthen enforcement of environmental policies

4. Seeding Springboards for Systems-Change

While there is a presence of early incubators that help launch start-ups, it isn’t enough to make them VC ready due to the missing support for “testing at scale”. This “missing middle” of capital is vital for making businesses investor ready (Fig. 4).

While wide spread presence of early incubators helps launch start-ups, it isn’t enough to make them VC ready due to the missing support for ‘testing at scale’

Start-Up Stages

ProblemSolution Fit Ideation to identify problem and find solutions

Promoters (Capital invested by promoters or angel investors)

Developing MVP and establishing proof of concepts through pilots

Large Scale testing and iterations through pilots

Limited support by either incubators/ accelerators or earlystage VCs

Developing and testing business models to acquire customers

Feeding growth through large scale customer acquisition Continued growth through international expansion or exit

Testing at scale requires patient capital, grants, blended finance options, first loss guarantees for innovator financing, and other innovative financial tools coupled with advisory support to launch sustainability start ups into growth stages.

Figure 4: Clustering of capital in a few sectors and stages, leading to a ‘Missing Middle’ of capital availability

A range of efforts can act as springboards such as:

“Challenges” (such as the Earth Short prize, Digital Society Challenge, etc.) that have the potential to spur innovation in deep tech using moon-shot ideas, and create opportunities to help the right ideas test at scale

“Venture studios” that can help tech start-ups graduate to validate market and raise follo -on capital

Fello ships to help inject interest and ne talent in the sector

Innovative pilot projects to test ne approaches (such as emissions trading)

Sustainable living is a multi-dimensional, multi-generational challenge, the solution to which requires speed, scale, and coordination among all stakeholders.

Even as we focus on the areas outlined above, given the vital nature of the problem, we are open to evaluating a wider range of proposals and supporting truly catalytic, pioneering and innovative solutions.

We look forward to partnering with missiondriven entrepreneurs building bold solutions to solve vital problems in Sustainable Living and helping create meaningful lives for the Next Half Billion.

1. United Nations Development Programme. (n.d.). Enhancing Climate Resilience India's Coastal Communities

2. IPCC 6th Assessment report on climate impacts, adaptation and vulnerability

3. Accelerating the growth of rainfed agriculture, Department of Agriculture & farmer welfare

4. Watts, J. (2019, February 4). A third of Himalayan ice cap doomed, finds shocking report. [The Guardian].

5. CSE: Climate India 2022 - An assessment of extreme weather events

6. Ap, D. et al. (2020). Assessment of stock vulnerability of Indian marine fishes to past climate changes. CMFRI

7. Mapping India’s Climate Vulnerability, CEEW & The climate collaborative

8. State of climate in Asia 2021, WMO

9. Climate finance capital allocation from Climate policy initiative, 2021

10. United Nations. "Climate Change - The Science." United Nations Climate Change

11. Ganguly T et. al. National Clean Air Programme (NCAP) for Indian cities: Review and outlook of clean air action plans

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This whitepaper is for informational purposes only and should not be construed as investment or other professional advice. Information has been obtained from sources believed to be reliable but Omidyar Network and Omidyar Network India do not warrant its completeness or accuracy