NIO Capital’s ESG strategy: Bottom-up, top-down, and inside-out

Environmental, Social and Governance (ESG) investment has been a major part of NIO Capital’s genes.


Since its inception in 2016, NIO Capital has endeavoured to promote sustainable development through investments, encouraging its portfolio companies to adhere to the ESG vision. On the occasion of World Environment Day (June 5th, 2022), we disclosed our ESG strategy, sharing with you our past journey of cooperating with our portfolio companies to build a sustainable future.


NIO Capital has been closely following the electrification and intelligentization trend in the automobile industry, with the energy sector as one of our investment priorities.


As part of NIO Capital’s genes, ESG investment has become a crucial component of our strategy in recent years for two reasons. First, more and more investors are showing their strong interest in ESG investment, with some investment firms even setting up ESG funds. Second, from a more practical perspective, companies with an ESG vision are more worthy of investment in today’s economic and political environment.


Bottom-up: Technologies mature, bringing economical clean energy


New energy resources are becoming more affordable thanks to technological innovation and efficiency improvement. This has become clear over the past decade, with the average cost of solar-power products declining by over 80% and the weighted average cost of batteries falling by more than 60% in the last five years.


The development of technologies has made new energy products more cost-effective, accelerating their marketization. Government subsidies are no longer the only financial support for the application of renewable energy.


China is playing a key role in the global industrial chains of both photovoltaic products and lithium batteries. The low-carbon development across the world fuses with China’s industrial progress. This is why NIO Capital has considered China as its main market when investing in firms accelerating energy transformation.


Moreover, the change in the energy mix has brought in all-around opportunities. However, the energy industry is massive in scale, which means there are a series of obstacles to transforming the whole sector and it is difficult to start reforms only from one aspect of the energy industrial chain. But the three pillars of the energy industrial chain, namely production on the supply side, the storage and transportation factors, and the demand side, are all currently undergoing a revolutionary transformation.


With the development of smart EVs and renewable energy technologies, such as PV- and wind-powered products, the upstream and downstream key components of energy systems now are undergoing disruptive changes.


When it comes to energy storage and transportation, China boasts the world’s most advanced high voltage transmission networks and accounts for a large part of installed power storage facilities in the world. The energy supply side will adjust according to changes in the demand side, providing a favourable business environment for new technologies and new business models.


Top-down: Following the national agenda to promote global low-carbon transformation


Recent years have seen the active promotion of the low-carbon transformation from both the Chinese government and the international community.


Back in December 2015, 196 parties signed the Paris Agreement under the UNFCCC (the United Nations Framework Convention on Climate Change) at COP 21 (21st Conference of Parties) in Paris. The agreement is a landmark in the multilateral efforts to fight climate change, encouraging all nations to strive for sustainable prosperity and a zero-carbon future, a consensus reached across the world.


Echoing the agreement, China set its goals to peak carbon dioxide emission before 2030 and achieve carbon neutrality before 2060 (the “double carbon” plan). Moreover, by 2060, China will have fully established a green, low-carbon and circular economy and a clean, low-carbon, safe and efficient energy system. In addition to the overall blueprint made by the central government, detailed and practical plans to reach the “double carbon” target have also been proposed, elaborating on annual missions and other specific and quantified goals.


China’s “double carbon” goal is not just vision-driven but also has pragmatic considerations. For example, China now relies heavily on imported petroleum and natural gas. Leveraging its advantages in industrial chains of EVs and photovoltaic cells, China might be able to create new growth areas in its economy under the “double carbon” plan.


This is believed to be the rationale behind China’s top-down “double carbon” policy.


Inside-out: ESG-oriented during the whole investment process


NIO Capital carries out the mission and vision of “Invest in Innovations that Sustain and Advance Humankind”. All its portfolio companies engage in ESG-related businesses, trying to promote the low-carbon and green transformation of the society and economy. NIO Capital is honoured to help these companies make the most of their strengths, unleash their potential, and grow into leaders in the ESG industry by providing them with multi-dimensional support.


NIO Capital has accumulated some ESG resources. In March, the firm closed the second tranche of its USD-dominated fund, NIO Capital Eve ONE Fund II LP. The decarbonization- and digitalization-focused venture fund saw investments by sovereign wealth funds, insurance companies, multilateral financial institutions, etc. from all over the world, and some have one of the world’s highest ESG standards. During the process of fundraising, NIO Capital has established a complete and quantified ESG analysis framework.


NIO Capital also shares its ESG resources with the portfolio companies to elevate their understanding of ESG. The firm will evaluate the ESG risks of the companies to be invested in. For example, it will check whether a company is on the negative list or if it has implemented detailed ESG regulations. After investments, NIO Capital will routinely collect ESG-related information, such as emissions reduction data and changes in the governance structure, from its portfolio companies.


Many of NIO Capital’s portfolio companies lead in their sectors on ESG development. For example, AlphaESS, an energy storage solution and service provider, has been ranked in the Global Cleantech 100, an annual list of the top 100 private innovation companies in clean technology, for several consecutive years. And early this year, Chinese carpool and taxi-hailing app Dida Chuxing cooperated with other organizations to jointly set China’s first carbon emission reduction standards in the ride-hailing industry.



With its further development in ESG, NIO Capital will integrate all ESG resources to promote the growth of the sector.