Novastar Ventures Secures $40 Million Green Climate Fund Investment to Catalyze Africa’s Climate Innovation Ecosystem

Africa-focused venture capital firm Novastar Ventures has secured a transformative $40 million equity commitment from the Green Climate Fund (GCF) for its new Africa People & Planet Fund III, which is targeting a total size of $200 million. The investment represents a significant milestone in efforts to bridge Africa’s massive climate finance gap and demonstrates growing confidence in the continent’s climate technology innovation ecosystem.

With offices strategically located in Nairobi, Lagos, and London, Novastar is one of the largest platforms dedicated to financing early and growth-stage businesses across Africa. Founded in 2014, the firm has built a reputation for backing startups that address proven demand for basic goods and services with innovative, technology-enabled business models that deliver both financial returns and measurable social impact. With over $200 million in assets under management, Novastar has positioned itself at the intersection of commercial venture capital and impact investing, demonstrating that profitability and positive environmental outcomes are not mutually exclusive.

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Addressing Africa’s Staggering Climate Finance Gap

The GCF’s $40 million commitment to Novastar’s third fund is designed to serve as a catalytic anchor investment that de-risks the fund and attracts additional private capital into Africa’s climate innovation ecosystem. This strategic approach addresses one of the most critical challenges facing the continent: the enormous gap between climate finance needs and actual investment flows.

According to estimates from the Climate Policy Initiative, Africa requires approximately $2.8 trillion between 2020 and 2030 to implement its Nationally Determined Contributions (NDCs) under the Paris Agreement—representing more than 93% of the continent’s current annual GDP. These commitments are essential for Africa to both mitigate its vulnerability to climate change and contribute to global efforts to limit warming to 1.5 degrees Celsius. Yet in 2019 and 2020, the continent received only 12% to 15% of the necessary investment, with total annual climate finance flows reaching just $30 billion—a mere fraction of the $250 billion needed annually.

This financing shortfall has created a critical bottleneck for Africa’s climate response, despite the continent contributing less than 4% of global greenhouse gas emissions while bearing a disproportionate burden of climate impacts. The gap is particularly acute for early and growth-stage companies that have proven business models but lack access to the patient capital needed to scale their operations across multiple markets.

Strategic Investment Focus and Geographic Reach

The new Africa People & Planet Fund III will invest in early and growth-stage climate-solution startups across Africa’s most dynamic markets, with a particular focus on Kenya, Nigeria, Rwanda, South Africa, and Egypt. These five countries represent diverse economic profiles and climate challenges, from Kenya’s leadership in renewable energy and agricultural innovation to Nigeria’s massive population and energy access needs, Rwanda’s progressive environmental policies, South Africa’s industrial transition requirements, and Egypt’s positioning as a North African hub for climate technology.

The fund’s investment thesis centers on three transformative themes that align economic growth with environmental sustainability. First, it will back digital and service innovations that enhance climate adaptation and resilience, helping communities and businesses better withstand the impacts of changing weather patterns, water scarcity, and agricultural disruption. Second, the fund will invest in clean technology solutions that enable the decarbonization of economic growth, particularly in sectors like transportation, energy, and manufacturing that currently rely heavily on fossil fuels. Third, Novastar will target innovative climate-positive technologies focused on natural resource management, including solutions for water conservation, soil health, waste reduction, and ecosystem restoration.

According to reports, Egypt’s Minister of Local Development and Acting Minister of Environment, Dr. Manal Awad, confirmed that approximately $50 million of the fund will be specifically allocated to Egyptian companies focused on climate technology within the agriculture sector. This targeted investment recognizes Egypt’s critical role in regional food security and the urgent need for agricultural innovations that can increase productivity while reducing water usage and greenhouse gas emissions in one of the world’s most water-stressed regions.

Prestigious Investor Syndicate Signals Growing Confidence

The GCF’s $40 million commitment is part of a broader coalition of institutional investors that reflects growing international confidence in Africa’s climate innovation potential. British International Investment (BII), the UK’s development finance institution, has committed substantial capital to the fund, bringing its extensive experience in supporting sustainable economic development across emerging markets. BII has previously backed Novastar’s Fund II and has a strong track record of catalyzing private sector investment in climate solutions.

The investor syndicate also includes prominent Japanese institutional investors, signaling a strategic shift in Asian capital allocation toward African climate opportunities. Sumitomo Mitsui Banking Corporation (SMBC), Japan’s second-largest bank by assets, represents a major vote of confidence from the Japanese financial sector. The participation of Mitsui O.S.K. Lines (MOL), a leading Japanese shipping and logistics company, is particularly noteworthy as it demonstrates corporate interest in sustainable transportation and logistics solutions that could transform supply chains across Africa.

Additionally, the Japan International Cooperation Agency (JICA) previously committed $10 million to Novastar’s Fund III, further cementing Japanese institutional engagement with African climate innovation. This follows a broader trend of Japanese investors increasing their exposure to African venture capital, with entities like SBI Holdings committing $40 million to anchor Novastar’s upcoming funds and mobilize matching commitments from other Japanese institutional investors.

The diverse composition of Fund III’s investor base—spanning multilateral climate funds, development finance institutions, commercial banks, and strategic corporates—provides Novastar with multiple channels for supporting portfolio companies beyond capital, including access to global markets, technical expertise, and strategic partnerships.

Proven Track Record with Transformative Portfolio Companies

Novastar’s ability to attract such substantial commitments from prestigious institutional investors is underpinned by its strong track record of identifying and scaling businesses that deliver both commercial returns and measurable impact. The firm’s existing portfolio spans Africa’s four largest venture capital destinations—Kenya, Nigeria, South Africa, and Egypt—as well as Ethiopia and Rwanda, demonstrating its pan-African investment approach and local market expertise.

Among Novastar’s most notable portfolio companies is BasiGo, Kenya’s pioneering electric bus company that is revolutionizing public transportation in East Africa. BasiGo offers electric buses to public service vehicle operators through an innovative pay-as-you-drive financing model that eliminates the high upfront costs traditionally associated with electric vehicle adoption. The company has successfully deployed over 100 electric buses in Nairobi and recently expanded into Rwanda’s capital Kigali, with plans to deliver 200 electric buses by 2025. In November 2024, BasiGo raised $41.5 million in Series A funding, demonstrating strong investor appetite for climate solutions with proven business models.

Koko Networks, another flagship investment, has transformed the clean cooking landscape in Kenya by making bio-ethanol fuel affordable and accessible to urban households. The company operates a network of automated dispensers across Nairobi that distribute clean-burning ethanol fuel at prices competitive with traditional charcoal. By accessing compliance carbon markets, Koko subsidizes clean cooking fuel for consumers while generating carbon credits from emissions reductions. In just a few years, the company has grown to serve approximately one-third of households in Nairobi, reducing an estimated 5 million tons of carbon emissions per household annually while also decreasing indoor air pollution-related health risks and lowering the cost of living for families.

Novastar’s portfolio also includes Turaco, Africa’s leading insurtech platform that provides affordable microinsurance products to mass-market consumers across the continent. The company has demonstrated remarkable social impact, with analysis by AfricInvest and The Bridgespan Group quantifying that every $1 invested in Turaco delivers an estimated 82x social return on investment. Turaco recently expanded into Ghana through the acquisition of MicroEnsure Ghana, advancing its mission to insure the next 1 billion people across Africa.

Other significant portfolio companies include iProcure, an agricultural technology venture that connects smallholder farmers with quality inputs and markets; Poa Internet, an internet service provider expanding connectivity to underserved communities; and Moniepoint, one of Nigeria’s largest business banking platforms that has generated large-scale benefits for micro, small, and medium enterprises through digital financial services. Moniepoint has grown to become one of Nigeria’s most valuable fintech companies and recently expanded into personal banking with a consumer app and debit card offering.

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The Green Climate Fund’s Strategic Approach to Venture Capital

The GCF’s investment in Novastar represents a significant evolution in how multilateral climate funds engage with the private sector and support climate innovation in developing countries. Established by the 194 countries that are parties to the United Nations Framework Convention on Climate Change in 2010, the GCF is the world’s largest dedicated fund helping developing countries reduce their greenhouse gas emissions and adapt to climate change.

Since its inception, the GCF has committed $16.6 billion, mobilizing a total of $62.7 billion in co-financing across 297 projects globally. The fund’s approval of Novastar’s venture capital fund, registered as FP287 and formalized at the GCF’s 43rd Board Meeting on October 30, 2025, demonstrates a strategic shift toward using venture capital mechanisms to unlock climate innovation at scale.

This approach recognizes that traditional project-based climate finance, while important, is insufficient to drive the systemic transformation needed in emerging markets. By investing in venture capital funds with deep local expertise and established track records, the GCF can leverage its capital to attract significantly larger amounts of private investment, support multiple companies across various climate solution categories, and enable the development of self-sustaining innovation ecosystems that continue generating impact long after the initial investment period.

The investment also aligns with the GCF’s broader strategic pivot toward decentralization and country-level ownership. At its 41st Board meeting in February 2025, the GCF approved $686.8 million in new investments, with Africa receiving the largest share at 38%. The Board also approved the establishment of regional offices beyond its headquarters in South Korea, reflecting Executive Director Mafalda Duarte’s vision that “if climate action is local, then the Green Climate Fund must be local too.”

Addressing Perceived Risks in African Climate Investing

One of the primary barriers to increased climate finance flows to Africa has been the perception of high investment risk among international investors. Concerns about currency volatility, political instability, weak regulatory frameworks, limited exit opportunities, and infrastructure constraints have historically deterred many institutional investors from allocating significant capital to African climate ventures, despite the continent’s enormous market potential and urgent need for climate solutions.

The GCF’s $40 million anchor investment is explicitly designed to address these perceived risks by providing a credible foundation that gives other investors confidence to participate. Anchor investments from respected multilateral institutions serve several critical functions: they validate the investment thesis and fund manager capabilities, provide downside protection through their subordinated position in some fund structures, demonstrate that climate and commercial objectives can be aligned, and signal that rigorous due diligence has been conducted on both the fund strategy and individual investment opportunities.

For private sector investors who might otherwise view African climate ventures as too risky or too small to warrant the due diligence effort, the GCF’s participation significantly lowers the barriers to entry. Institutional investors can leverage the GCF’s technical analysis, benefit from blended finance structures that improve risk-adjusted returns, access deal flow through established fund managers like Novastar, and demonstrate to their own stakeholders that they are contributing to global climate goals while pursuing appropriate financial returns.

This de-risking function is particularly important given that most climate finance in Africa currently comes from public sources rather than private capital. According to FSD Africa, 87% of climate finance flows to Africa in 2020 came from public actors, with limited participation from private investors. Achieving Africa’s climate goals will require dramatically increasing private sector engagement, and anchor investments like the GCF’s commitment to Novastar provide a proven mechanism for catalyzing that shift.

Growing Momentum for Climate Technology Investment in Africa

The GCF’s investment in Novastar arrives at a moment of growing momentum for climate technology investment across Africa, even as overall venture capital funding on the continent faces headwinds from global economic uncertainty. Climate-related technology startups are increasingly attracting significant capital as investors recognize both the commercial opportunity and the urgency of the climate crisis.

According to data from Africa: The Big Deal, while fintech startups attracted over $1 billion in 2024—representing 47% of total African startup funding—climate-related technology ventures claimed approximately 32% of total funding. This represents a significant increase in the climate tech sector’s share of investment compared to previous years, with capital flowing into diverse subsectors including renewable energy, agricultural technology, green transportation, water management, and waste management.

The growing investor interest reflects several converging trends. First, technology costs for renewable energy and electric vehicles have declined dramatically, making climate solutions increasingly competitive with fossil fuel alternatives even without subsidies. Second, African governments are implementing more supportive policies for climate innovation, including renewable energy mandates, carbon pricing mechanisms, and incentives for clean technology adoption. Third, international climate commitments and carbon markets are creating new revenue streams for companies that can demonstrate verified emissions reductions. Fourth, the physical impacts of climate change—including droughts, floods, and agricultural disruption—are creating urgent demand for adaptation and resilience solutions.

Novastar’s Impact Investment Philosophy and Social Value Framework

Central to Novastar’s success in attracting both commercial and impact-oriented investors is its rigorous approach to ensuring that portfolio companies deliver meaningful social and environmental benefits alongside financial returns. The firm applies what it calls an intentional Social Value Screen to every new investment—a framework that is explicitly codified in the fund’s governing documents and forms a core part of its investment decision-making process.

Novastar positively screens for investments where profitable commercial growth and the scale of social/environmental benefits are clearly and strongly correlated, avoiding investments that entail trade-offs between financial and impact objectives. At the time of initial investment, companies must satisfy at least one of three criteria: their core business provides basic goods or services to mass market consumers (meaning commercial success depends on profitably serving the many, not just the few); their business model generates large-scale benefits to mass market suppliers who are integral to the value chain; or Novastar’s investment is structured specifically to enable the business to serve and benefit mass markets.

This philosophy recognizes that the largest market opportunities in Africa lie in addressing the basic needs of everyday consumers and incorporating them in business value chains. The continent’s rapidly growing, predominantly young, and increasingly urbanized population represents enormous latent demand for essential goods and services including clean energy, affordable transportation, financial services, healthcare, education, and connectivity. Companies that can profitably serve these markets at scale through innovative, often technology-enabled business models have the potential to generate both strong financial returns and transformative social impact.

The approach has proven successful in attracting diverse investors who share Novastar’s vision but may have different primary motivations. Development finance institutions like BII value the demonstrable development impact and alignment with their mandates to support poverty reduction and sustainable economic growth. Commercial institutional investors appreciate the focus on large addressable markets, scalable business models, and alignment between impact and profitability. Climate-focused investors like the GCF recognize that ventures serving mass markets can drive emissions reductions and adaptation at the scale needed to address the climate crisis.

Portfolio Company Support Beyond Capital

Novastar’s value proposition extends well beyond providing capital to portfolio companies. The firm takes an active, hands-on approach to supporting its investments through governance participation, operational guidance, strategic planning support, and access to its extensive network of advisors, potential customers, and follow-on investors.

For early-stage companies that may be navigating rapid growth for the first time, Novastar helps professionalize operations by strengthening management teams, implementing financial controls and reporting systems, developing market expansion strategies, and building organizational culture and values. The firm’s team brings deep expertise in African markets, having worked across multiple countries and sectors, and can help portfolio companies avoid common pitfalls while capitalizing on opportunities.

Critically, Novastar also assists companies in accessing follow-on financing rounds needed to scale operations. The firm leverages relationships with international and regional investors to facilitate introductions, helps prepare companies for due diligence processes, supports valuation negotiations, and often participates in subsequent funding rounds to maintain its ownership stake and demonstrate continued confidence in the business. This ongoing support is particularly valuable in the African venture ecosystem, where fewer investors operate compared to more mature markets like North America or Europe.

The firm’s focus on impact measurement and management also helps portfolio companies articulate their social and environmental value creation to stakeholders including customers, employees, regulators, and investors. By developing robust impact metrics and reporting frameworks, Novastar enables companies to access impact-oriented capital sources, differentiate themselves in competitive markets, and attract talent motivated by mission-driven work.

Outlook and Implications for African Climate Innovation

The successful closing of the GCF’s $40 million investment in Novastar’s Africa People & Planet Fund III sends important signals to the broader climate finance and venture capital ecosystems. For multilateral climate funds and development finance institutions, it validates the venture capital model as an effective mechanism for deploying climate finance at scale while crowding in private capital. For commercial investors, it demonstrates that climate solutions in Africa can generate attractive risk-adjusted returns when backed by experienced local fund managers with proven track records.

For entrepreneurs building climate technology companies across Africa, the fund’s launch provides access to patient, flexible capital designed to support the long-term scaling of impactful businesses. The $200 million target fund size, when fully deployed across 15-25 portfolio companies, will provide meaningful capital to ventures at critical inflection points where growth capital can accelerate market penetration, geographic expansion, and product development.

As Novastar begins deploying capital from Fund III, the firm’s investment activity will be closely watched by other investors seeking to understand which climate solution categories are attracting capital, what business model innovations are proving most successful, and how climate technology ventures navigate the unique challenges of operating in African markets. Success stories from the portfolio will likely inspire additional fund formation, creating a virtuous cycle of capital deployment, learning, and ecosystem development.

The fund’s focus on Kenya, Nigeria, Rwanda, South Africa, and Egypt—markets at different stages of economic development with distinct climate challenges and opportunities—will also provide valuable insights into how climate solutions can be adapted and scaled across diverse contexts. Ventures that succeed in multiple markets may ultimately expand across the entire continent and beyond, positioning African climate innovation as a global export.

Looking ahead, the continued growth of Africa’s population, rapid urbanization, and economic development will create enormous demand for climate solutions over the coming decades. The investments made today by funds like Novastar’s Africa People & Planet Fund III will help determine whether that development follows the high-carbon, environmentally destructive path of previous industrializers or charts a new trajectory that aligns economic progress with planetary sustainability. The stakes could not be higher—for Africa, for global climate goals, and for the entrepreneurs, investors, and communities working to build a more inclusive and sustainable future.

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By: Montel Kamau

Serrari Financial Analyst

10th November, 2025