At the recent Unlocking Capital for Sustainability 2023 event in Singapore last week, Richard Mattison, Vice Chair at S&P Global Trustcon, stressed that there are reasons to be optimistic about the prospect of energy transition from fossil fuel to a more sustainable alternative as part of an effort to curb the impact of the climate crisis.

“What I would say is that, in our best-case scenario, I would tell you that greenhouse gas emissions will fall by 25 per cent in 2050. This is not enough … but there are reasons to be optimistic. We are looking at huge increases in investment in renewables,” he said.

But as discussions surrounding energy transition become more intense, some questions remain: How exactly can we realise this transition from fossil fuel to renewable energy? How do we turn the promise into reality?

But before we can get into that, we must look at the hurdle that we are facing in the process.

According to Triple Pundit, some of the challenges for energy and industrial technology shifts include capital, development period, and the lack of history of “attractive” investment returns that are “traditionally produced” by other verticals.

However, “This limited history of attractive returns has shown some signs of improvement over the last few years. Climate tech exits reached at least US$114 billion in 2021 — with 104 US companies exiting, a 70 per cent year-over-year increase,” wrote Bill Lese.

Also Read: How Third Derivative assesses the impact of a potential climate tech investment

SPACs are seen as a good alternative for climate tech companies to secure resources, but it is not without limits.

“SPACs did unfortunately become part of an over-hyped cycle which resulted in multiple companies trading at unsustainable valuations and, ultimately, leading to significant losses. However, on the positive side, capital continues to flow in at all levels in support of climate tech companies,” Lese said.

With that, he acknowledged that there is no quick answer to the question of how to promote energy transition. In fact, there is an exhaustive list of the steps that we need to take here, starting from getting the technical roadmap right to developing multiple exit strategies.

How SEA should approach climate tech investment

With the need to approach climate tech investment through a long-term lens, this might lead us to a different question: How should the Southeast Asian (SEA) tech startup ecosystem look at the problem?

Having observed the ecosystem for close to a decade, I learned that it might be best for the ecosystem to look at it the same way as deep tech investment.

Also Read: Preference for green jobs is the “most exciting” climate tech development: Lightspeed

With deep tech investment, there is a common understanding that returns do not happen overnight. At least, it’s not as quick as investment in other consumer-facing verticals. There is also a heavy emphasis on research and development in the process of building climate tech solutions and the need for a deep technical understanding of the matters of climate science and related aspects.

This might give a solution that investing in climate tech is not everyone.

And that is okay.

As the regional startup ecosystem, we are slowly recovering from a bad habit of burning money and acting based on FOMO, hurriedly searching from one trending vertical to the next. Perhaps this long-term approach is what it takes for us to be more meticulous and to be more considerate in our decision-making process. This might give an image that the lucrative sector is not open for everyone, but considering the importance of tackling the climate crisis, perhaps it is best to leave it to the hands of the selected few.

After all, not everyone gets to be a hero.

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Image Credit: RunwayML

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