With tough net zero targets facing many Asian economies, the region’s cleantech companies represent attractive opportunities for international investors, while global cleantech firms looking for new markets will find many profitable openings.
Powerful economic factors
The International Monetary Fund predicts Asia will represent around 60% of global GDP growth this year. And the combination of rapid urbanization and rising consumer purchasing power will make the region account for half of the world’s electricity consumption by 2025.
These factors are creating strong demand for green energy, with almost 45% of the world’s installed renewable energy capacity already in Asia.
Asian companies are ready to commit to the development and integration of disruptive cleantech solutions. And, having worked in the software and cloud space over recent years, I’ve witnessed an Asian industrial sector that has evolved from adapting to concepts like SaaS and FEMS (factory energy management systems) to digitalizing production lines, switching to renewable energy, integrating new cloud infrastructures, testing novel technologies, and moving ever-closer to net zero promises.
But falling behind other nations in cleantech innovation is a big concern here. And we see more Asian companies – corporates and SMEs alike – looking for overseas investment and collaborations, whether in the form of joint development partnerships or technology licensing, to stay ahead.
So, where are the opportunities for investors and tech innovators to take a stake in Asia’s net zero initiatives?
Untapped opportunities in Japan …
Japanese power generation giant Jera, for example, has highlighted a clear need for investment in renewables and hydrogen, emphasizing that it can’t develop these essential new business lines on the strength of its existing balance sheet.
Setting a goal to reach net zero CO2 emissions by 2050, Jera aims to invest USD 300 million in cleantech and energy-related startups with its newly established corporate venture capital (CVC) arm. And, for that, the company is seeking investors to inject equity.
Jera also just announced the establishment of London-headquartered Jera Nex – a subsidiary that will develop, invest in, own and operate a range of renewable energy assets, capitalising on the UK’s expertise in financing and developing renewable projects globally.
In addition, earlier this year, Japan’s Ministry of Economy, Trade & Industry (METI) proposed USD 14 billion of subsidies for companies undertaking research and development into clean energy, with an acute need to recruit international expertise to make this successful.
… and South Korea
In February, the South Korean Government announced its Deeptech Incubator Project for Startup (DIPS) program, looking to fund more than 120 businesses across 10 key sectors including greentech.
But, while the idea is to nurture domestic startups to reach the technology maturity needed to attract further investment, some of the applicants have told us they’re concerned about global expansion, as only a few Korean SMEs have been successful at doing business beyond the peninsula so far.
Indeed, while Korea has the technical capability, talent, eagerness and infrastructure to commercialize novel technologies, international expansion is a common hurdle.
Take Woowa Brothers, a Korean food delivery unicorn acquired by Delivery Hero. After failing to establish a viable market presence in Vietnam following five years of aggressive marketing and localization, it’s discontinuing its operations in the nation and shelving its expansion to other Southeast Asian countries.
This highlights a clear need for more international VCs in the Korean market to provide mentorship to hone companies’ market expansion capabilities, as well as funding. Confidence is also a barrier: Korean firms need a nudge to take bolder steps to put their feet on the other side of the planet.
China: the clean energy leader
Meanwhile, China has become a clear leader in the clean energy space. It installed a record 301 GW of renewable power generation capacity – including solar, wind and hydro – in 2023, accounting for almost 59% of the world’s renewable capacity additions.
Jiangkou hydroelectric plant in Wulong District, Chongqing, China
It added 216 GW of solar PV capacity alone last year, equal to 14% of the world’s total installed capacity and more than many countries have ever installed. And it sold more than half the world’s electric vehicles (EVs).
But while China has proved its determination to decarbonise its economy, there’s still an investment gap to fill across many fields – especially renewables, EVs and fuel cell development. It’s an environment where, with the right strategy, VCs could profitably help to grow successful Chinese companies.
International cleantech innovators also stand to do well in China. Examples include France’s Air Liquide, UK scaleup (and our former client) Ceres, and Germany’s Bosch – primarily providing hardware and equipment for fuel cell developments.
And now the country is looking for carbon accounting software, battery management systems and smart grid management tools – presenting a considerable expansion market for the right international companies.
Southeast Asia
The opportunities are also significant across Southeast Asia.
Issuing a statement at COP28, the Association of Southeast Asian Nations (ASEAN) underlined its commitment to shift to clean energy, emphasizing three essential elements: international cooperation, knowledge-sharing, and investment in infrastructure and technology.
To boost commercial returns and attract more international investment, Southeast Asia has eased its regulations. And the region offers a wide range of viable greentech and carbon projects which could well be strategically important for investors and innovators looking to expand their footprint and benefit from the region’s decarbonisation drive.
Indonesia, for example – rich in nickel, a key component of EV batteries – has been seeking help and investment to develop its manufacturing capabilities. Fostering the development of industrial AI and cleantech will push the country steadily towards net zero.
Of course, investing and expanding in the emerging Southeast Asian cleantech ecosystem comes with its challenges, and finding your way in such a new market might feel risky. But, in many cases, it promises to pay off, considering the pressing need to achieve net zero goals in the timeframes set by governments across the region.
Profitable business ventures
Asia, then, is at the forefront of cleantech development and is placing a high priority on further innovation. To achieve this, the region needs funding alongside international skills, experience and technologies. And, with these, come considerable opportunities for international investors and tech scaleups.
That said, whether you’re looking to invest or expand, an on-the-ground presence is essential to understand the cleantech ecosystem, carve out a solid reputation and build relationships in this part of the world.
This, combined with the wisdom from hindsight of past failures as well as successes, can lead to extremely profitable business ventures.
To discuss your prospects for investing or expanding in Asia’s cleantech sector, you can contact Alexandra at alexandra.gugay@intralinkgroup.com