There’s a mismatch of investment and entrepreneur focus in SEA’s climate tech: Steve Melhuish

Southeast Asia is lagging behind the west in climate tech, and this is a function of economic maturity and action from key stakeholders (governments, enterprises, consumers and investors), said Steve Melhuish, Founding Partner of Wavemaker Impact.

Unlike in the west, where governments are taking climate change seriously (for example, the EU has a green plan and commitment to a 55 per cent reduction in carbon emissions by 2030), the ASEAN region doesn’t give due attention to the problem.

All talks and no action

“ASEAN’s governments and enterprises are talking but not acting,” said Melhuish, also the founder of the region’s proptech giant PropertyGuru. Taking Singapore as an example, he said the country’s greenhouse gas (GHG) emission is expected to rise to 65 metric tons per annum by 2030 (an over 18 per cent since 2014). According to a recent Yale Report, it is the worst-performing among the world’s wealthiest nations in GHG emissions.

In this region, only Thailand and Vietnam have made ‘net-zero’ commitments, and only US$9 billion has been deployed to green in 2020 versus the US$2.7 trillion needed over the next decade.

Also Read: How to tackle climate change by choosing a career in cleantech

In contrast, western countries have already initiated several concrete plans to tackle climate change. “Many European Union (EU) governments have banned fossil fuel car sales, imposed import tariffs and carbon taxes, new regulations, and implemented a sustainability taxonomy. All European countries have committed to net-zero by 2050. European and North American regulators are increasingly starting to prosecute companies and boards that ignore ESG (environment, social and governance),” he said.

Globally, corporates are also taking climate change seriously. About 75 per cent of global MNCs stated they would remove suppliers that endanger their net-zero transition by 2035. Most have also hired chief sustainability officers (CSO), made net-zero commitments, and published impact reports. Companies representing 27 per cent of global market capitalisation have set science-based targets versus only 4 per cent in SEA.

“In Southeast Asia, SMEs account for about 40 per cent of the GDP and 75 per cent of the workforce, but they are fragmented and lack financial and human resources or sustainability skills,” he said.

Things, however, have started changing. “We have started seeing large publicly listed companies (CDL, Capitaland, Olam, etc.) hire CSOs, publish sustainability plans and impact reports, and start making ESG disclosures,” remarked Melhuish, who also runs Planetrise, which invests in sustainable businesses.

Countries like Singapore have introduced several initiatives to create a better climate-tech environment. “Over the past 24 months, Singapore introduced several initiatives. They include new SGX rules on ESG disclosure, MAS’s new centre for sustainable finance, Carbon Impact Exchange plan, and the ’30 by 30′ food plan (aimed at producing 30 per cent of its own food by 2030). It also plans to reduce fossil fuels energy reliance from 95 per cent, with 30 per cent renewable energy imports by 2035.

In addition, the island nation has also launched an SG Eco Fund and set up EV charging points and grants to support energy-efficiency projects and investments in new carbon capture and hydrogen tech. Last month, it also proposed a carbon tax rise from US$5 per tonne to US$25 per tonne by 2025 and agreed to review a potential net-zero commitment.

Four other SEA countries also came on board and set up an ASEAN Taxonomy Board last year. In addition, we saw US$9 billion ploughed into green assets in SEA in 2020.

The region now has over 30 sustainability-focused active institutional investors.

“From a climate-tech startup ecosystem perspective, all this bodes well for the region. I now see about 15 climate tech startup deals per month (compared to 2-3 until four years ago). In addition, almost every week, I engage in discussions with experienced and wannabe entrepreneurs, corporate leaders and investors about how they can play a role in climate action.

Climate tech is beyond alt-protein and EVs

Globally, in climate tech, the alternative protein vertical has attracted substantial investment in recent years, including in Southeast Asia (although the meat industry contributes only about 15 per cent of total greenhouse gas emissions, it contributes massively to deforestation and poor animal welfare). Companies such as TurtleTree and Shiok Meats, or alt-protein funds like Big Idea Ventures and Better Bite Ventures are doing a great job focusing on these areas.

“However, based on my experience, over 80 per cent of the climate tech deals I receive every month are non-alt-protein. They span energy, nature/land use, building & construction, manufacturing, and transport-related. Over the last three years and a half, only two of my 16 Asia climate tech investments have been in the alt protein space,” he said.

The region will bear the brunt of climate change in future and represents a US$2.7 trillion climate-tech opportunity. But SEA gets virtually no attention today; less than 3 per cent of climate-tech investment globally goes to SEA, and most of this goes into EVs.

However, EVs address one of the smallest emissions contributors in Southeast Asia, whereas land use, food and agriculture are almost 50 per cent of emissions in Southeast Asia.

“There is a mismatch of investment and entrepreneur focus today in SEA. Hence, we at Wavemaker Impact are working with experienced entrepreneurs and have identified over 50x Southeast Asia-specific opportunities that could each have the potential to build 100 million tonnes x US$100 million revenue ventures,” he said.

Melhuish believes that tackling climate change is a monumental task that requires a huge effort from all of us — governments, enterprises, consumers and investors. There’s no bigger problem (or US$ trillion opportunity) than climate change. It will require massive investment in research, design, science and transformational tech to address our global emissions in the next 20-plus years.”

Also Read: Wavemaker Impact, Enterprise SG to groom 12+ climate-tech firms over the next 3 years

“But it will be too late if we do not act urgently. We need talented founders to focus on solving real business problems (revenue, customer acquisition, cost, productivity, etc.) focused on stakeholders in the largest emissions sectors in SEA. They need to adopt [suitable] business models and finance and use existing technologies to build venture grade climate-tech ventures that can scale rapidly. There is a massive opportunity for the climate-tech startups founded today in SEA to become the next generation of tech unicorns in the region,” he concluded.

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