According to a report by risk assessment firm Verisk Maplecroft, Asian cities face the most significant risk from environmental hazards due to climate change. Among other things, extreme heat, natural disasters, and air pollution threaten to upset our ecosystem’s balance and humanity’s sustainability. While these inherent events may occur naturally as part of nature’s life cycle, climate change further serves to multiply the rate and severity of weather-related risks. With higher global temperatures, experts predict a rise in storms, droughts, and flooding – all of which pose a significant danger to human life. There is no doubt that these cataclysmic natural disasters are already taking place, with countries like South Korea experiencing some of the highest rainfall rates in the past 80 years, causing severe floods and damage to infrastructure.
To counteract the effects of climate change on a global scale, the Paris Agreement was ratified by world leaders in 2015 by the United Nations Conference of Parties. The Agreement, which illustrated a global framework to avoid dangerous climate change by limiting global warming to below 2 degrees Celsius and undertaking efforts to incite rapid reductions in carbon emissions, was the first ever universal and legally binding global climate change agreement. It signalled a common understanding among world leaders that climate change was a visceral and immediate threat and that radical actions must be taken to address global warming.
In the context of ASEAN countries within the Paris Agreement, members of ASEAN pledged to reduce their emissions through 2030 and introduce large-scale policies to do so. While admirable, these goals face significant roadblocks as ASEAN countries struggle to balance their goals of reducing greenhouse gas emissions while attempting to meet the needs of rapidly expanding economies. Thankfully, every problem presents an equal opportunity. Savvy private equity firms looking to make ESG-guided investments should see this as a way to diversify their portfolio while bridging resource gaps. Climate tech solutions are the best way to do so.
What Are Climate Tech Solutions
Defined as any technology used to address climate change, climate technologies are primarily designed to mitigate greenhouse gas emissions while resolving any potential consequence of climate change. Examples of climate technologies that fit the profile of the former include renewable energies such as wind, solar, and hydropower. In contrast, technologies that provide the latter’s bill include early warning systems, sea walls to mitigate natural disasters, and even drought-resistance crops that can endure rising temperatures and dry spells.
Many might think that climate tech solutions as the end-all in the fight against climate change, but the challenge lies in mainstream adoption and cost-efficiency. Many iterations of climate tech solutions are expensive to manufacture and costlier to implement on national or global scales. Presently, climate tech solutions present the possibility of a decarbonised future and a glimpse of how technology could shape the next century.
How Can Investing In Climate Tech Change The World
Thankfully, investments in climate tech have continuously demonstrated growth year-on-year. As an emerging asset class, with a total of 87.5 billion USD invested from mid-2020 to mid-2021, this aggressive influx of financial capital boasts well for the advancement, development, and mainstream adoption of climate tech solutions. Behind this monstrous growth of climate tech investments lies an underlying renewal in corporate social responsibility – many venture capitalist and private equity firms are adopting environmental, social, and governance (ESG) investments to build a more sustainable portfolio. In light of this. In recent years, institutional asset managers have been carving out broader niches in which investors can ethically grow their wealth.
Investing in climate tech solutions is twofold – businesses would be supporting and developing these technologies, which could radically address climate change issues, while building a sustainable economy and unlocking new economic opportunities and jobs. Publishing a report on the benefits of climate tech investments, the United Nations has found that every 1 USD put channelled towards climate tech solutions yields 4 USD on average in benefits.
For the uninitiated looking to begin investing, several industries are worth taking a closer look at. The first of which is undoubtedly energy. Research in the realm of clean and renewable energy has been a priority for decades in the hopes of weaning mankind off fossil fuels. Achieving a low-cost source of renewable energy is the holy grail in the journey towards decarbonisation. While solar, hydro, and wind power sources are making great strides, bleeding edge advancements in the realm of hydrogen are also demonstrating excellent results as ways to generate and store energy reliably.
The following industry ripe for investment lies in agri-food and developing alternative proteins and potential food sources. Traditional agriculture practices for farming meat produce substantial amounts of methane and greenhouse gases while consuming copious amounts of potable water, ultimately contributing to climate change and global warming. By disrupting and reinventing how we obtain meat and protein, society could exponentially lower the number of resources needed to produce food.
The last industry to keep an eye on is electric vehicles. Singapore has begun using natural gas to generate power while focusing on making electric vehicles more common on roads. Indonesia aims to produce 2.5 million electric motorbikes and 600,000 electric cars by 2030, while ride-sharing platforms Grab and Gojek are racing to electrify their fleets.
The Future Is Now
While the pace of climate tech funding might concern some investors, others reckon this is the best opportunity for early movers. For example, Indonesian private equity firm Gunung Capital is committing 500 million USD to fund the decarbonisation of its assets under management and carbon transition startups in the next five to seven years. The firm believes that climate tech solutions will create a more sustainable economy and environment for decades to come and is devoting efforts to inspiring and generating Asian incubators working towards climate tech solutions here in the region.
