Nuveen and Ecozen Solutions: Valuing a Private Equity Impact Investment

In December 2021, Rekha Unnithan, CFA, received a cold outreach from Devendra Gupta, co-founder and CEO of Ecozen Solutions (“Ecozen”), an agriculture-focused cleantech business based in Pune, a major technology and manufacturing hub in India. Founded in 2010, Ecozen was looking for investors to help them scale their vision of disrupting the way perishables were handled across the agricultural value chain. Specifically, Gupta and his team sought to address two challenges in a sector that was also the largest employer in India. First, they wanted to help farmers generate more value out of their land by bringing a clean and sustainable solution to irrigation and energy. Second, in helping farmers increase their production, Gupta and his team had to address how to reduce spoilage, which had been estimated at about 16 percent of total agricultural production every year, and which was attributed largely to a weak cold chain infrastructure.

Unnithan looped in Pete Murphy, who headed up the impact management side of the deal process. They agreed that the opportunity seemed like a “home run” from an impact perspective—the company’s products were supporting the avoidance of more than 500,000 metric tons of carbon emissions per year while increasing crop yields and incomes for the smallholder farmer segment—but they had to be sure that financially, the investment also made sense. The deal was smaller than they traditionally invested, and it would be the first manufacturing company in India that they would consider. Further, aside from Epstein, there seemed no other touchpoints with the company—no close connections or overlapping investments with current investors in the company. They also had to think about valuation—a sensitive topic as global public and private market valuations were beginning to soften over supply chain disruptions, labor challenges, political uncertainties, and inflation fears. Finally, while the social and environmental impacts of the investment seemed obvious, they had to hold the company accountable by operationalizing and measuring the impact. But first, they had to figure out how best to do that in an emerging markets manufacturing context where benchmarks for measuring impact did not exist.