Explosive growth seen for APAC’s ESG and smart city startups – Earn Charter

Growing pressure for an ESG focus in business and investment to meet climate targets will likely drive an explosive demand for green technologies and services across every industry, according to a recent report released yesterday by KPMG and HSBC.

This is one of the key takeaways from the “Emerging Giants in Asia Pacific” report, which looks into the region’s maturing technology-focused ecosystems that are producing billion-dollar companies at a rapid rate.

“Fast-growing technology start-ups are the new wave of SMEs contributing towards economic growth and more. Looking ahead, the global push towards carbon-neutrality will be a major driver of innovation as traditional sectors go green, and Emerging Giants will likely play a key role in developing the technologies that can reduce carbon emissions and promote more responsible stewardship of the environment. Asia will be a crucial battleground in the fight for a more sustainable future,” said Honson To, chairman, KPMG Asia Pacific and KPMG China.

Close to over 6,500 technology startups with a valuation of up to US$500 million were studied across 12 markets, including China, India, Japan, Singapore, South Korea, Australia,  Indonesia, Hong Kong, Malaysia, Taiwan, Thailand and Vietnam.

According to the report, the emergence of new sector verticals is attracting record-breaking investments, leading to a proliferation of larger, more valuable startups in the region.

Beyond Fintech and SaaS

Beyond the traditional sectors associated with new economy businesses such as FinTech or software-as-a-service, the report identified around 120 technology-related industry subsectors among these businesses, with blockchain, smart city, and sustainability and ESG verticals being the most prominent.

Sustainability and ESG verticals such as EV charging infrastructure, sustainable packaging and sustainable fashion are among the top 20 subsectors, making sustainability-related products and services a key focus for roughly 15% of the emerging giants identified.

The top 20 list also included four health-associated verticals, including assistive tech, AI-powered drug discovery, neurotechnology and mental health technology.

Meanwhile, the smart city-associated areas, such as IoT security and digital twins were present in the leading 10 subsectors. Virtual collaboration technologies also feature prominently with two categories – virtual events and low-code/no-code – making the top 20 list.

Advanced computing technologies were also well represented, with quantum computing making the top 5 and cognitive computing making the top 20.

“Emerging Giants in Asia Pacific excites us because we see the start-up ecosystem as complimentary to the established end of the financial services industry: they’re a source of innovation, and invigorate both local and regional economies with their dynamism,” says Surendra Rosha, co-chief executive, HSBC Asia-Pacific.

Other key findings

Daren Yong, head of technology for media and telecommunications, KPMG Asia Pacific, noted that the region’s emerging giants are bold, ambitious and cutting-edge in the new platform and software applications they are offering.

“Most importantly, they are transforming and pioneering the technology landscape over the coming years, in addition to thinking about what is useful to their customers now,” said Yong.

Meanwhile, below are other key findings from the report.

  • While a repeat of the record-breaking private investment levels in 2021 is unlikely, 1Q 2022 figures suggest that 2022 is on target to exceed both 2020 and 2019 funding levels in the Asia Pacific. Australia, Malaysia and South Korea have already seen deal values pass or nearly pass 2020 totals.
  • As the world’s biggest fintech adopter, the Asia Pacific region has experienced a boom in financial services transformation within the last two years as fintech applications progress in tandem with user uptake. Considerable interest in cryptocurrencies has also led to a surge in crypto financial services providers and blockchain players.
  • Top challenges faced by Emerging Giants include navigating regulatory complexity and securing technology talent. Formulating effective ESG and tax strategies, as well as leveraging government incentives and implementing management processes for distributed workforces, will be cornerstones of future growth.

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