Climate Action in APAC: How to Pick the Winners

Climate Action in APAC is a hotbed of activity, but it’s also a complex landscape to navigate. With differing definitions of “climate action” and a lack of transparency in deal flow, investors need a clear guide to identify the most promising opportunities. This post cuts through the noise, highlighting key trends and opportunities for those looking to make a climate impact (and a profit) in the region.

Climate Action in APAC: Lost in Translation?

One of the biggest challenges in APAC climate investing is the lack of consensus on what “climate action” actually means. From Singapore to Myanmar, government policies, investor priorities, and consumer awareness vary wildly.

However, there’s one common denominator: profitability. In the Asian part of APAC, climate-focused startups are expected to be just as commercially viable as those in any other sector. Impact is great, but it needs to come with a solid business case. This presents a unique challenge for entrepreneurs who must balance the need for sustainability with the demands of a competitive market.

Climate Action in APAC: What’s Hot and What’s Not?

Identifying clear investment trends can be tricky due to inconsistent data and reporting. But here’s what I’m seeing on the ground:

🔥 Hot:

• Sustainable Agriculture and Food Systems: This sector is red hot, driven by the need to increase food production while minimizing environmental impact. Precision agriculture technologies, such as sensors, drones, and AI-powered analytics, are enabling farmers to optimize resource use and increase yields. Vertical farming is gaining traction in urban areas, offering a solution to land scarcity and reducing transportation costs. Alternative protein sources, like plant-based meats and cultivated seafood, are attracting significant investment as consumers become more conscious of the environmental footprint of their food choices.
• Sustainable Transportation: The need for cleaner transportation is driving investment in electric vehicles (EVs), charging infrastructure, and battery technology. However, challenges remain in terms of affordability, range anxiety, and the availability of charging stations, especially in rural areas. Ride-sharing and micro-mobility solutions, such as e-scooters and bike-sharing programs, are also gaining popularity in densely populated cities, offering a more sustainable alternative to private car ownership.
• Renewable Energy and Grid Infrastructure: Southeast Asia’s growing energy demand is being met with a rapid increase in renewable energy capacity, particularly solar and wind power. Microgrids and distributed generation are playing a crucial role in expanding energy access to remote communities and increasing grid resilience. Investment in smart grid technologies is also crucial to manage the intermittent nature of renewable energy sources and ensure grid stability.

❄️ Not:

• Climate Adaptation and Resilience: Despite the increasing frequency and intensity of extreme weather events in the region, investment in climate adaptation and resilience measures remains insufficient. This is partly due to the difficulty in quantifying the return on investment for these projects and the lack of clear policy frameworks. However, the growing economic costs of climate change impacts are likely to spur greater investment in this area in the coming years.
• Carbon Capture, Utilization, and Storage (CCUS): While CCUS technologies hold promise for decarbonizing heavy industries, large-scale deployment in APAC is still in its early stages. High costs, technological challenges, and the lack of a clear regulatory framework are hindering wider adoption. However, increasing carbon pricing mechanisms and government support could accelerate the development and deployment of CCUS technologies in the region.

Singapore: The Gateway to Climate Action in APAC and Climate Investing?

Singapore is strategically positioning itself as the Silicon Valley of climate tech in APAC, leveraging its strong financial sector, stable political environment, and supportive government policies. The city-state has become a hub for deal flow, attracting both international and regional investors.

• Government Initiatives: Singapore has implemented a range of programs to attract climate tech investment, including the Green Finance Action Plan, which aims to develop green finance solutions and markets, and the Tech@SG program, which provides support for international tech companies to establish a presence in Singapore.
• Success Stories: Singapore’s ecosystem has nurtured several successful climate tech startups, such as Sunseap Group, a leading solar energy provider in Southeast Asia, and Shiok Meats, a cell-based seafood company developing sustainable alternatives to traditional seafood.
• Limitations: Despite its strengths, Singapore also faces limitations as a hub for APAC climate investing. The high cost of doing business and the limited size of the domestic market can be challenges for startups. However, Singapore’s strategic location and strong connectivity to the rest of Southeast Asia make it an attractive gateway for companies seeking to expand in the region.

Investing in Climate Action in APAC: The Players and the Plays

The APAC climate investment landscape is evolving rapidly, with new funds and partnerships emerging to support the growing number of climate tech startups in the region.

• Key Investors: Prominent investors in the APAC climate tech space include Temasek, a Singaporean sovereign wealth fund with a strong focus on sustainable investing; GIC, another Singaporean sovereign wealth fund with a growing portfolio of climate-related investments; and Wavemaker Impact, a venture capital firm focused on early-stage climate tech startups in Southeast Asia.
• Investment Strategies: Investment strategies in the region vary widely, from early-stage seed funding to growth-stage investments. Sector-specific funds are also emerging, focusing on areas such as renewable energy, sustainable agriculture, and circular economy solutions. Impact investing is gaining traction, with investors seeking to generate both financial returns and measurable social and environmental impact.
• New Structures: Innovative partnerships and collaborations are emerging to support climate tech startups. Investible’s partnership with Mandiri Capital Indonesia is a prime example of cross-border collaboration to provide funding and mentorship to early-stage companies.

Climate Action in APAC: Hurdles, Work-ons, and Opportunities

🚧 Hurdles:

• Gender Diversity: The climate tech space in APAC still suffers from a lack of female representation, both among investors and founders. Addressing this gender gap is crucial to ensure that diverse perspectives and experiences are incorporated into climate solutions.
• Misaligned Expectations: Some investors, particularly those from outside the region, may have misaligned expectations about the types of solutions that are most needed in APAC. Local founders often prioritize more hardware-focused approaches to address specific challenges in their markets, while some investors may be more focused on software-based solutions. Bridging this gap requires greater understanding and collaboration between investors and entrepreneurs.

🛠️ Work-ons:

• Data Transparency: Improved data sharing and reporting are crucial for informed decision-making in the climate tech space. Standardized metrics and reporting frameworks can help investors assess the impact and potential of climate tech solutions.
• Championing Local Success: We need to celebrate and support APAC climate tech champions on the global stage. Promoting the success stories of local startups can attract more investment and talent to the region.

🚀 Opportunities:

• Hybrid Solutions: Founders in markets like Indonesia, Vietnam, and the Philippines have the opportunity to develop innovative hybrid solutions (software + IoT + hardware) for the unique challenges of the region. These solutions can be scaled to other emerging markets facing similar challenges.
• Global Expansion: APAC startups have the potential to achieve global scale without relying on the US market. The region’s growing middle class and increasing demand for sustainable solutions provide a significant market opportunity for homegrown climate tech companies.

My Bets in APAC:

• BillionBricks: Providing net-zero homes for underserved communities, addressing both the housing and climate crises.
• Altilium Green Energy: Developing innovative renewable energy solutions to accelerate the transition to a clean energy future.
• SOLshare: Pioneering peer-to-peer energy sharing in Bangladesh, empowering communities and increasing energy access.

Call to Action:

The APAC climate tech market is dynamic and full of potential. By understanding the nuances of the region and embracing collaboration, investors can unlock significant opportunities for impact and return.

I encourage investors to connect, engage with climate tech startups, and actively participate in the growth of this exciting ecosystem. Together, we can build a more sustainable future for APAC and the world.

What are your thoughts on the APAC climate tech scene? Share your insights in the comments!

If you’re a climate action Startup and you are based in APAC or your first market is there, click the link below to arrange a meeting and tell me what you’re doing. You can find more startup stories and resources here.