3 reasons to invest now in cleantech startups in Asia

Published on Friday, 10 July 2015

Published by Daniel Hersson on Friday, 10 July 2015

ADB took part this week in Slingshot Manila, an official APEC conference to promote startup entrepreneurship and investment.
ADB took part this week in Slingshot Manila, an official APEC conference to promote startup entrepreneurship and investment.

Say “cleantech” and most people think solar panels, wind farms, and maybe electric vehicles. They are correct, but clean technology or cleantech is much more than that. In our view, cleantech is about developing and deploying new solutions that can help address the impacts of climate change. Cleantech covers everything from how we produce and use energy and other resources, to how we manage our water, air, and land.

Cleantech has the potential to make a difference so we can better tackle complex, seemingly intractable environmental and social challenges. New, affordable cleantech solutions can help make our homes, cities, and rural communities more efficient, smarter, and inclusive. Cleantech also gives people access basic services—such as energy, water or health care—that were previously unavailable. Finally, cleantech can also be a strong driver for economic development and competitiveness by assisting businesses, farms, and factories in their efforts to save time and money, and produce more using less.

ADB is working to accelerate cleantech and in particular, cleantech entrepreneurship in Asia. Here are 3 more reasons why the time has come to invest in cleantech:

1. Global demand for cleantech is already massive.

Contrary to common perception, cleantech is not a niche market – in fact, it has never been.  According to data from the UK Department of Business, Innovation and Skills, the total global annual market for low-carbon and environmental products and services is over $5 trillion. That’s massive, even bigger than the markets for industries like ICT or defense.

Sources: UK DBIS (2011-2013), Spri (2012), Gartner (2013).

2. A new wave of cleantech is coming.

Radical cost reductions in IT—particularly in sensors, cloud computing, and data analytics—are unlocking completely new market opportunities for cleantech – markets we didn’t even imagine a few years ago. All of a sudden, anything can be connected. We can now measure and sense almost anything in real time. We can send and analyze large amounts of data wirelessly using advanced algorithms; and then use that information to remotely control almost any machine or piece of equipment. This new concept, sometimes called “the Internet of things,” is rapidly changing our world. It could transform the way we manage almost everything that touches our lives.

By 2020, the market for this new wave of “smart cleantech” for cities, grids, and manufacturing is projected to be in the trillions of dollars. And the future is even more exciting when you factor in potential trends like the “sharing economy” and financial technology. Imagine what is about to come in the next 10 years.

Sources: Frost & Sullivan, Greentech Media.

3. Cleantech startups can be key drivers of innovation and development.

Startups are powerful drivers of innovation. Data from the US shows that startups on average file more patents per employee than large organizations, and spend less money per patent. Startups are also particularly good at “disruptive innovation” that radically challenges how we approach or solve problems. Pioneering cleantech companies like Tesla or Solar City didn’t even exist 15 years ago. The more cleantech startups we have today, the more cleantech leaders we have tomorrow.

Startups also drive economic development. New, fast-growing companies led by ambitious entrepreneurs help create ,many jobs. In Asia, small and medium-sized enterprises account for almost 40% of GDP and more than two-thirds of the labor force. In the United States, almost all net job creation has come from companies less than 5 years old.

Strengthening startups

ADB’s pilot Climate Technology Finance Center (CTFC) seeks to advance the innovation, transfer, and commercialization of cleantech in developing Asian countries by supporting accelerator and incubator programs for high-potential cleantech entrepreneurs to help address the causes and impacts of climate change in the region.

ADB supports cleantech entrepreneurs through CTFC and other initiatives.

With those goals in mind, we partnered this week with the Philippines Department of Trade and Industry on Slingshot Manila, an official APEC conference to promote startup entrepreneurship and investment. Our resource speakers—Shyam Menon of Infuse Ventures, our accelerator partner in India; Song Wei, CEO of Tianjin TusPark from the People’s Republic of China (PRC); and Steve Vickers of telecommunications giant Xiaomi—to share their knowledge and lend perspectives from more mature startup environments in India and the PRC. ADB Senior Energy Specialist Aiming Zhou and myself were part of the plenary panels.

If we hope to see an Asia-Pacific region with less poverty and more inclusive, sustainable growth, a first step is to strengthen the region’s cleantech startup communities, called “ecosystems”, where innovation begins.