equity investments to smallholder farmers with a target of around 15 percent annual compounded return. Successful VC industries have also been seeded by the governments of Israel and Brazil (box 2).

# **Box 2. Venture Capital Funds in Israel and Brazil**

Israel’s **Yozma** program, established in 1993 with $100 million capital, initially sought to attract experienced international venture investors, who had to come up with $12 million of their own capital and work in partnership with an Israeli firm. Yozma would provide such investors $8 million in matching investments, with a capped upside to further attract private investors. Factors contributing to the program’s success include that (i) its capital was spread across many small funds, (ii) it fostered relationships between local and international venture capitalists, and (iii) business incubators and tax incentives were established to complement the program (Yozma 2016; OECD 2003; Druid 2009). In the two decades after Yozma was established, Israel went from having no venture capital (VC) sector at all to having the highest VC penetration in the world as a share of gross domestic product (GDP), reaching 0.36 percent in 2012.<sup>5</sup> Brazil’s **Inovar** program combines the role of VC co-investor with the provision of extensive capacity building. Inovar was launched in 2000 to teach entrepreneurs how to raise funds and to work with equity-holding partners. Limited partners learn how to evaluate funds, and general partners how to select companies, manage funds, assess investment opportunities, and manage portfolio companies. A special organizational framework and tax incentives have been put in place. In the beginning, Inovar’s sponsored VC funds needed to raise only 20 percent from private investors as market validation, with the rest provided by the government as loans with a capped return. The Inovar model has since been exported to other Latin American countries. In 2014, the program managed a $197 million VC portfolio (EMPEA 2016; Leamon and Lerner 2012).

_Source:_ Authors’ compilation, based on various sources.

SIFs may also be thematic investors. Particularly in clean-energy finance, several SIFs have been established with the objective of attracting private investment in wind, solar, and thermal energy infrastructure; and energy efficiency. Some climate-focused SIFs are funded by multilateral financial institutions, including Asia Climate Partners (established by the ADB) and the GEEREF (a hybrid fund with both private and public shareholding established by the EIB and several European governments) (box 3). Green SIFs are emerging at the national level, too. For example, Norway recently announced its intention to establish a domestically focused renewable energy investment fund, Fornybar AS, and the Government of China is considering the establishment of a national green investment fund.

# **Box 3. Examples of Green Strategic Investment Funds**

The **Asia Climate Partners** (ACP) is a $400 million joint initiative of the Asian Development Bank (ADB), the financial services group ORIX, and the asset manager Robeco. ACP makes private equity investments in the environmental industries, resource efficiency, and renewable energy sectors in Asia. Besides private equity, ACP

> 5 OECDiLibrary (2013); Ernst & Young puts it at 0.65 percent (EY 2015).

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