U.S.-China Green Fund, formerly known as U.S.-China Building Efficiency and Green Development Fund, is a commercially-run private equity fund initiated by business and government leaders from both the U.S. and China in 2015. Its mission is to promote sustainable green development in China through U.S.-China cross-border innovative collaborations in finance, green technology and business models, and by establishing a channel for advanced U.S. technologies and products to commercialize in the Chinese market.
In June 2016, the Fund (formerly known as the "U.S.-China Building Efficiency and Green Development Fund") was mentioned in the "U.S.-China Strategic and Economic Dialogue Joint U.S.-China Fact Sheet - Economic Track" for its role in strengthening global cooperation and economic governance.
In October 2016, the fund management company ("U.S.-China Green Investment Management Co., Ltd.") was approved by the State Council and incorporated and registered with the State Administration for Industry & Commerce (SAIC) of the People's Republic of China on November 2, 2016.
Vision: to become the best-in-class green equity fund and the commercial implementer of U.S.-China green collaboration.
Philosophy: "Invest · Greenergize China" - Be the green force. We strive to promote expansive green and sustainable business growth in China through equity investments in leading companies in our focused sectors. We believe that green equity funds will lead future trends and play an influential role in building benchmarking enterprises and leading sustainable development in the new economy in different industry segments.
There are three unique approaches that differentiate the U.S.-China Green Fund from traditional private equity firms:
Business Model Innovation
"Vertical industry platform + Horizontal city collaboration + Green Technology Research Institute" operating model: First, for each subsector the fund chooses for investment, the fund will invest into a national leading platform company. Secondly, the fund will partner with local government to set up local green development funds or joint-venture companies, and introduce our national platform company to implement related cleantech or energy efficiency in the designated cities or provinces. Lastly, Green Technology Research Institute will integrate leading U.S. and Chinese technologies and products to provide a comprehensive technical solution for green development and help invested companies achieve commercial profitability and investment returns.
Investment Approach
In order to accelerate the penetration of U.S. green technologies and products in the fast growing Chinese market, the team developed a unique five-pillared business model which we call "P.R.I.M.E."
POLICY: Governments at the central, provincial, and local levels provide policy support and financial incentives to green investments. As a market-driven fund, however, the U.S.-China Green Fund sees their return on investment must be based on commercially viable investments and operations and not rely on government subsidies. Also, the Fund sees itself play a role in helping "quantify" government policy, by introducing rigorous investment analyses, project evaluation, as well as execution methods towards different industries, sectors, and regions.
RESEARCH: One of the Fund's unique capabilities is in its Green Technology Research Institute, which conducts applied research and provides technological support to the investment team with technology assessments and commercialization capabilities in the Chinese market, and in identifying ways to adapt U.S. technologies to the local context and applications.
INTEGRATION: Many companies are focused on commercializing a single or a couple of technologies or products, and we focus more on the overall technology solution, because it can generate the greatest economic returns as well as become more green. Thus, the Green Technology Research Institute's primary responsibility is to integrate the most advanced and commercially-viable U.S. green technologies to provide comprehensive solutions to companies and projects.
MONEY: As a private equity fund, having access to capital allows the Fund to invest in clean and environmental technologies in the U.S., as well as platform companies or projects in China. While the primary goal of the Fund is to generate returns for the investors and team, the Fund also carries a mission to make a green impact in their investments. An investment will go ahead only when the project is both profitable and carries positive environmental and social impact. The Fund needs to be disciplined and creative at the same time in making investment decisions.
EXECUTION: As a private equity investor, the Fund rigorously selects leading companies with promising business models and strong management teams to invest. When the Fund becomes a shareholder of a company, it also helps the company improve their operational efficiency, as well as bring networks and resources, in addition to capital, to help the company grow. The Fund holds a strong belief in an investment philosophy of "30 percent reliance on capital and 70 percent reliance on management."
Balancing Financial Returns and Social Responsibility
While creating investment returns for our limited partners, a portion of the fund's general partner profits will be donated to the fund's own charity foundations to support education, scientific research, training, policy promotion, and public outreach related to sustainable development, as well as U.S.-China exchange to help improve the bilateral relationship.
Investment Sectors
- Seek attractive industries representing China's future economic development and business models with long-term sustainable growth drivers
- U.S.-China Green Technology Research Institute will integrate leading U.S. and Chinese technologies to provide comprehensive solutions to the fund's portfolio companies and assist them in becoming sustainability benchmark companies in their respective sectors
- Advise portfolio companies to lead the green development of their industries and create a new sustainable economic model
- As more industries adopt sustainable practices through investment, it aims to transform a larger percentage of China's economy to become more green
Adhering to the concept of long-term value investing and focusing on two major areas where our expertise lies:
Green Investment 1.0: traditional green investments in clean energy, energy efficiency and environmental protection and;
Green Investment 2.0: technology-driven green consumer services upgrades centered around smart cities and villages
Guided by a clear investment philosophy and strategy and leveraging the extensive experience and strong network of our team, we have deployed over 2.5 billion RMB of investments and have established strong a project pipeline worth nearly 8 billion RMB.
Investments
East Low Carbon: a leading Energy Service Company ("ESCO") company in China. By providing holistic solutions and capital, ELC helps energy consumption intensive facilities such as five-star hotels, major hospitals, government buildings, urban complexes, and industrial plants to reduce energy consumption. To-date ELS has successfully completed 60+ energy savings projects including collaborations with Shangri-La, IHG, and Hyatt Hotels. Most recently, one of the energy saving projects conducted by ELC received official recognition by the U.S. Department of Energy as a 2017 U.S.-China Energy Performance Contracting (EPC) pilot project and was formally announced at the 8th annual U.S.-China Energy Efficiency Forum.
Capital Heat: a Beijing-based centralized heating company that recovers waste heat from power generation and industrial facilities (steam or hot water as the heating medium) and transmits the heat through a newly-constructed distribution network of pipes to designated locations for district heating for residential home and industrial facilities. The company covers a heating area of 14 million square meters and is expected to reach 100 million square meters by 2019, working on green heating projects in Zhangjiakou and other cities and districts in Beijing, Tianjin, and Hebei Province.
Green Supply Chain: The Fund has formed strategic partnerships with leading global and Chinese companies to improve energy efficiency along the entire supply chains of their respective industries, from manufacturing to logistics to services.
Hos Joy: a comprehensive smart and energy efficient home improvement service provider that addresses families' needs for integrated home improvement solutions with a more comfortable and greener living environment. Their solutions cover a wide range of products including heating and cooling system, air/water purification system, intelligent control system, and a renewable energy system. Since the company's establishment in 2009, it has been continuously driving innovation, growth, and integration. Today it has more than 400 service outlets and internet capabilities and has served more than 300,000 families in 70+ cities in 13 provinces.
UIB: a high-end hospital investment and management company that provides medical services in maternal health, reproduction, and children's health. The company started its first clinic with 103 beds in 2012 and received approval for building two new hospitals with 106 and 120 beds, respectively. It has become one of the top three hospitals in its city of operation in maternal and infant care. By investing in the hospital, the Fund aims to make the hospital turn it into a green hospital by improving its energy efficiency and waste management.
New Starting Point: A fast-growing dormitory rental and related services company that serves the housing needs for blue-collar workers in the urban service industry. Since its inception, rental units and revenue have been growing at an annual growth rate of 200% to 300%. With the investment from the U.S.-China Green Fund, the company began to introduce greener products and services, including renewable energy supply, building energy efficiency management, smart systems (such as water meters for energy savings), and more comfortable and healthier living standards.
Huitongda: provides enhanced services to villages in 15,000 towns by leveraging the modern online-to-offline business model and empowering local village shop owners to become local entrepreneurs. Business growth is driven by selling and servicing distributed solar products, electric pick-up trucks, and improved agricultural products through the network of 80,000 mom-and-pop shops in the villages in order to improve their livelihoods through more green and sustainable products and services.
AIpark: provides fourth-generation intelligent parking technology to manage city-wide parking systems (both road-side and garages) to mitigate traffic problems and reduce GHG emissions. Tests have been done successfully in major cities including Beijing and Shanghai, and the company is building parking systems in ZhangJiaKou and other tier-two cities in China.
==References==
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