The focus on sustainability has in the past couple of years led to the rise of startups working to mitigate climate change. Mumbai-based sustainable financing platform TapFin is working on removing the financial barriers of these startups and also promoting more entrepreneurship in this space.
Aditya Singh, Co-founder and CEO of TapFin, says that the segments leading the charge in this sector include clean mobility, electric vehicles (EVs), charging infrastructure, battery technology including secondary & tertiary usage, and smart transportation systems. “With the global push towards reducing carbon emissions, these companies are not only helping to create a greener future but are also tapping into a market with significant growth potential,” he says.
Startups in the circular economy are also playing an important role by tackling environmental issues and opening up new economic opportunities. Apart from these, there are players in the sustainable materials and technologies space.
“As consumers become more conscious of the environmental footprint of their purchases, there’s a rising demand for materials that are both eco-friendly and have high performance. Startups developing biodegradable plastics, green building materials and renewable energy solutions are stepping into this space, which has tremendous potential. At the same time, with the increasing adoption of renewable energy sources like solar and wind, efficient energy storage solutions are becoming essential. Startups developing advanced battery technologies or energy storage systems are playing a crucial role in enabling a clean energy future,” he says.
Singh gives the example of electric vehicles. These have created a buzz in the last decade but financial barriers can hinder its widespread adoption. One of the primary challenges is the high upfront cost of EVs and the limited access to financing, he points out.
“For those with limited credit history or lower incomes, obtaining affordable financing for an EV can be difficult. The limited availability of affordable financing options is also due to the inability to accurately assess and price the risk or correctly identify and put in place the necessary mitigants. TapFin’s ecosystem approach enables us to create necessary risk mitigants that help lenders underwrite better,” he says.
It is also working to expand the charging infrastructure network by partnering with charging network providers and helping them access formal credit to set up charging stations. “We believe that traditional underwriting models do not fully appreciate the amount of near real-time data available in the EV ecosystem and how to use this data to make the models more robust or inclusive. New underwriting models are required that include EV-relevant data sets and assessment are needed to increase the funnel and the flow of credit into this nascent ecosystem. We are creating such new underwriting models that incorporate both traditional as well as contextual data,” he explains.
TapFin also provides market linkages to MSMEs and startups by connecting them with larger market players, OEMs and supply chain partners. At the same time, the company is creating training programmes to equip entrepreneurs with the skills and knowledge they need to succeed in sectors like clean mobility.
“These programmes are being designed to enhance their understanding of market dynamics and sustainable practices, giving them the tools to thrive in a competitive landscape. Additionally, our platform provides data-driven insights that help startups optimise their operations, reduce costs and enhance their competitive edge. These initiatives are all about empowering entrepreneurs, particularly in tier 2 and tier 3 cities, to seize the opportunities,” the CEO says.
Among other challenges that sustainability startups face, Singh says that these firms often operate in emerging markets or rely on new technologies that traditional financiers may view as high risk. This perception can lead to limited access to affordable credit, making it difficult for startups to secure the funding they need. The longer payback periods associated with many sustainability initiatives, especially in areas like renewable energy, also pose a challenge. Investors looking for quick returns may be hesitant to commit capital to projects that take years to become profitable, he points out.
Nevertheless, the landscape for climate startup funding has undergone a considerable transformation in recent years. Singh sees a surge in investor interest, with a growing number of venture capital firms, private equity funds, and impact investors allocating capital to this sector. This increased interest has been fuelled by a greater awareness of the urgent need to address climate change and the potential for significant financial returns.
Additionally, he mentions that government support has also played a crucial role in driving investment in this sector.
While the company is currency focused on catering to the clean mobility sector, it is laying the groundwork to diversify into other critical areas of sustainability, including solar energy, wind power, and other renewable energy technologies.
Singh says they are also making investments in their technology and data capabilities. Along with this, the company is actively seeking collaborations with OEMs, lending financial institutions, insurance providers and technology providers to co-create innovative products. “These partnerships will help us introduce new products, such as green bonds and sustainability-linked loans, tailored to the unique requirements of businesses in this sector,” he adds.
