Growing awareness
Grace Segran | June 04, 2011

In 2010, total global investment in clean energy grew from $186 billion in 2009 to $243billion, an increase of 30%. Asian countries, fuelled largely by China’s growth, were the second largest recipient with $82.8 billion. In the wake of Japan’s nuclear disaster and as oil prices surge above $100 again, clean technologies are getting a fresh look from investors.
 
Grace Segran discusses with Anthony Fox, a partner at Zouk Ventures Ltd based in Singapore, where the industry is headed in Asia and what his investor strategies are.
 
Are cleantech investors starting to come back following the market collapse?

We have seen a definite increase in interest in Limited Partnerships (LP) investors over the last 12 months. A combination of gradually improving global economic conditions and confidence plus an increased awareness of the issues surrounding our space have meant more LP’s are allocating funds to this space but more importantly are now beginning to sign off on those allocations. We especially saw a strong interest from Asian and Middle Eastern Sovereign funds.
 
Where is the cleantech market right now?

 The market is clearly global. We are seeing continued deal flow in Europe and North America as well as Asia. In Asia what we are now seeing is an increasing realisation of the critical, long-term global issues which the cleantech market addresses. This is of course accelerated by the fact that Asian economies are, in general, much stronger than their western counterparts and are experiencing much faster economic growth. This is contributing to the strong interest from businessmen and entrepreneurs in this market.
 
Of course, at the moment, no discussion on clean technology can be heard in Asia without mention of the tragic events in Japan. This will further enhance governments' and investors' awareness of the energy issues we are facing, and raise interest in finding the most sustainable, clean and efficient ways of addressing those needs.
 
Has cleantech fared relatively better than other industries?

The cleantech market experienced a downturn in a similar way to many other sectors. Some of the reasons are of a general nature such as governments' financial status and some more specific such as their ability or political appetite to implement the shift to low carbon economies. However, the downturn did not affect all cleantech industries the same way - some industries even profited from the difficult environment such as energy efficiency technologies that lead to cost savings.
 
On a broader basis, however, the cleantech market has benefited from growing global awareness of the issues we face and so has not suffered major setbacks as have some other industries. The strong fundamental market drivers are fully intact and in certain cases their impact is stronger than ever before: increasing demand for natural resources like energy and water, rising oil and energy prices, and climate change issues.
 
Where are the most interesting cleantech investment opportunities in Asia?

There are a number of areas in Asia that offer interesting investments. One must remember that in Asia in general, the venture capital market sees much less game changing technical innovation and much more implementation of technologies. China is a good case in point where there is still relatively limited research and development and own innovation in game changing technologies but do very large scale implementation of European- and American-derived technology. A good example is the large Chinese pv manufacturers who are generally using German-derived technology but have implemented it on a very large scale.
 
Outside of China, the market is clearly less developed but we believe opportunities exist in south-east Asia which have not yet been realised. We also see a growing awareness of environmental and energy issues from governments across Asia which will fuel sector growth in the next few years.
 
Indonesia, in particular, has a market in its infancy but there is clearly a growing awareness of the space as demonstrated at last year’s cleantech forum in Jakarta and the sustainability conference being held this April, which is being well supported by the Indonesian government. We are excited about the prospects of growth in the cleantech market in Indonesia.
 
Are investors interested in early or later stage VC funded companies?

There is a wide range of investors now looking at the space and this means a broad array of interest in the size of company and investment. Due to the wide ranging nature of the definition of cleantech, the number of potential technologies it covers and the time it typically takes to grow a company in the space, we are finding that many investors are supportive of our approach of looking only at growth stage companies with proven technology, a customer and revenue base.
 
In addition, separate from investing in exciting companies, there are many opportunities for project related investments in renewable energy and environmental infrastructure. Investors are responding well to our philosophy of investing in cleantech companies and infrastructure model via separate funds, which allows us to benefit from a cross-sector perspective and network, whilst also clearly differentiating the return and risk appetite of investors.
 
Are coal, mining and transportation industries likely to grow in Asia?

 These are very important industries in Asia and will continue to be so. They attract major investment based on the growing affluence and energy, travel and consumption patterns of the local population and we do not see this investment slowing down in the near future. In some areas (like cheap coal) they directly compete with clean technologies but in others, are complementary. Indeed, going forward, more adoption of clean technologies in enhancing these industries will be beneficial to all.
 
What is your outlook for cleantech in China and South East Asia?

We are very positive on the outlook for cleantech in Asia in general. We are seeing a number of our portfolio companies from Europe gaining significant market traction in Asia and this speaks to the rapid development of the market in Asian countries. In addition, we foresee major growth in Asian cleantech companies both in China and regionally as the market matures.
 
What will it take for China and Asia to achieve global leadership in the clean energy economy?

There are signs that this is happening in certain specific segments such as the large scale pv manufacturing. However, for the broader base of cleantech companies in Asia to become global players they will need to move further from their past history of technology implementers and into more research and development and technical enhancement capabilities. Whilst to an extent this is beginning to happen in China, as well as in Taiwan and South Korea, it needs to be more widespread to enable regional cleantech players to become major forces on the global stage. Increasing local demand for energy savings and clean technologies is required to generate a vibrant environment for entrepreneurship in this industry.
 
What are the challenges faced by cleantech industries?

Cheap coal is creating a challenge to other clean and renewable energy resources. However, we see also an opportunity there: coal mining and its usage in power plants has to become cleaner; many new technologies can help to make coal mining and firing less harmful for the environment. Hence, we intend to contribute to a more sustainable path by promoting new technologies. The same is true for mining and transport. Especially in transport -- there is a strong need to use cleaner and efficient technologies.
　
In the medium to long term, we are very confident that cleantech companies and infrastructure will have a major role to play in supporting sustainable economic growth in Asia. The signs we and our portfolio companies are seeing are that there is already a developing market in the region, and as rapid population and economic growth puts greater pressure on resources, demand for cleantech and renewable energy solutions can only increase.
 
Clean Energy


John Elkington, a world renowned expert on sustainability and environmental responsibility spoke to GlobeAsia about the larger issues of clean energy.

Has there been a shift in the consciousness of Asian governments, corporations and consumers towards cleantech?

Is it just talk about energy efficiency, or are there also many now taking action on all levels. What is driving those who do take action?
China's latest 5-Year Plan is an early indication that China is beginning to wake up to the scale of the environmental and natural resources challenge its current economic model faces. Most governments, corporations and citizens in the region remain oblivious, however, and the chances are that it will take major problems to wake them up. Pakistan's floods have shone a spotlight on the vulnerabilities of poor countries and Japan's nuclear travails have done the same for wealthier countries, but too often the answer is more of the same.



What will happen if Asia doesn't jump on the cleantech bandwagon?

Simply put, it will lock itself into unsustainable patterns of development, condemning hundreds of millions of people to poverty, pollution and disruption, and it will miss out on staking a claim to one of the biggest, defining markets of the twenty-first century. On balance, however, I'm optimistic: Asia may be late to the party, but it will arrive in due course.

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