http://www.youtube.com/watch?v=6wlELp1QMI8

In this episode of China Money Podcast, guest Chenggang Jerry Wu, principal investment officer of IFC's (International Finance Corporation) climate change fund, discusses IFC's commitment to Chinese private equity funds in the climate change sector, the new opportunities arising from China's pollution treatment efforts, and what he looks for in a first-time fund manager.

Listen to the full interview in the audio podcast, watch an abbreviated video version, or read an excerpt.

Q: Can you first give us a brief introduction of IFC's climate change fund and your role in managing the fund?

A: IFC is the largest multilateral organization focused on emerging markets' private sectors. We invest more than US$10 billion a year into private sectors across emerging markets. We started investing in private equity funds in 2000, and have invested in more than 130 funds in emerging markets. I believe IFC invested in roughly 10% of all the private equity funds ever existed in emerging markets. We currently have an active portfolio of more than US$2 billion.

Clean tech and energy efficiency is one of our focuses in our private equity investments. IFC started investing in these areas in 2007. Up until now, we have invested in 17 funds in total, and on average we invest in three to four funds per year. The main focus includes traditional clean tech, renewable energy (both upstream manufacturing and downstream power generation), and all sorts of resource efficiency and environmental services (such as recycling, water efficiency, sustainable agriculture and sustainable forestry).

IFC has a subsidiary called IFC Asset Management Co., which is a fund manager that leverages IFC's own expertise and resources with the capacity to raise funds from third party investors. IFC Asset Management Co. set up a Fund of Funds (officially called the Climate Catalyst Fund), which just had its first closing of US$500 million, to invest in climate change funds. IFC put US$75 million into it, and it will do further fundraising in the future.

I'm not directly managing that FoF. I started in the current position in 2011, and my role is to provide pipeline and resources of the IFC to the FoF, so that they can decide whether to co-invest with IFC or not. I also manage IFC's own investments in the climate change area.

Q: On IFC's website, it describes the IFC Climate Catalyst Fund as part of IFC's strategic focus on addressing climate change across emerging markets. Specially in China, what investments have you made?

A: Given our investment focus, you can probably guess that China is the largest focus of the fund's portfolio. Up until now, roughly 30% to 40% of the fund's portfolio is focused on China. Our focus includes environmental services, waste recycling, renewable energy and energy efficiency. We have also invested in funds investing in water efficiency, water recycling and water treatment.

As you may know, the clean tech and renewable energy sector in China has gone through tremendous adjustments during the past two years. The issue of overcapacity, the European debt crisis and changes in subsidy schemes in Europe have negatively impacted China's export-oriented clean tech sector, especially the solar sector, and to a less extent, the wind sector. A large number of Chinese companies will not survive. But I believe we are at the end of the adjustment, and in fact, it may be a good time to get into the sector again.

Moreover, given the recent headlines about China's (grave) pollution situation, we see this area as having great potential. The new leadership will take pollution treatment seriously.

Q: Do you invest only in private equity funds, or individual projects, or both?

A: IFC does both. For myself, I invest only in private equity funds. We prefer to avoid venture capital funds because intellectual property rights are often at the risk of compromise in emerging markets.