rethink sustainability
The growing importance of climate tech in Asia
Climate technology businesses will help the APAC region adapt to and mitigate climate-related risks in the future.
Asia-Pacific (APAC) will bear the brunt of some of the worst effects of climate change, making it vital that the region finds solutions to mitigate the impact of the droughts and floods that are becoming ever more commonplace. According to a report from McKinsey Global Institute1, Asian societies and economies will become increasingly vulnerable to climate-related disasters unless they are able to put adaption and risk management strategies in place. By 2050, 75% of the USD 1.6 trillion global annual damage to capital stock from riverine flooding will occur in Asia, for example.2
The region also has a substantial role to play in climate management for the rest of the world. Despite covering less than 1% of the world’s surface, Southeast Asia, for example, has the capability to provide approximately 30% of the global carbon-offset supply by 2030.3
Against this backdrop, climate technology – or ‘climate tech’ – solutions are becoming increasingly prominent. Globally, climate tech investment has been projected to grow from USD 13.76 billion at the end 2022 to USD 51.09 billion by 2029.4 Climate tech businesses deliver innovative technology solutions that seek to mitigate the impacts of climate change, focussing on areas like renewable energy, carbon capture and storage, and sustainable transport. They leverage machine learning, data analytics, blockchain, and remote sensing, among other technologies.5
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Asia’s climate tech growth
In 2023, China took second place on the global list of leading climate tech investors, allocating USD 8 billion to the sector.6 However, for the majority of the APAC region, climate tech is still in its infancy.
In fact, the pace of growth of venture capital (VC) investment into climate tech has slowed over the last two years, as macroeconomic factors have impacted VC businesses and their capital allocations more broadly – VC investment in APAC in the year to end November 2023 totalled USD 932 million, falling from USD 1.53 billion in 2022.7 This is not just a regional issue, however. A report from PWC suggests that total venture and private equity investment in the sector globally was down 50.2% year on year, reaching USD 638 billion in 2023, taking climate tech start-up funding back to a level last seen five years ago.8
This is likely to be a short-term stall, however, due to funding costs rising in a challenging market environment. Market experts believe that investments will soon return to rapid growth.
Growth will also come as the market matures. Increasingly, investors are moving away from early-stage deals, which made up two-thirds of all climate tech deals in 2018 and 2019 but had halved their market share by October 2023, with the balance of deal-making activity instead moving towards mid-stage deals.9
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Technology’s role in climate change
Climate tech companies in Asia are innovating in every area: building and managing usage data for sustainability reporting, developing hydrogen energy technology, asset tokenisation, digital workflows, low-alkali biomass fuel, cooling solutions, waste recycling, AI to support ESG data, energy storage systems, ESG risk and analytics, carbon offset projects, sustainable robotics, carbon measurement and management, and many more.10
At Lombard Odier, we believe this technology can play a vital role in the fight against climate change, and that investment in climate tech presents an exciting opportunity to create long-term returns whilst driving the sustainability transition. Tech firms can be powerful enablers, improving the efficiency of the materials and services we use, and building capacity in renewables and energy efficient solutions.
Human activity has breached many of the planetary boundaries that define the biophysical safe space for life on Earth. The world needs to transition to a more sustainable and regenerative approach – a future based on a Circular, Lean, Inclusive and Clean model that we call the CLIC® economy. Climate tech innovations have the potential to contribute to this transition, moving the needle at a faster pace not only in Asia but in all parts of the world.
1Climate risk and response in Asia (Mckinsey.com)
2 Investing in Technologies for Climate-Resilient Infrastructure in Asia (Aiib.org)
3 Climate Technology in Southeast Asia: Key to Unlocking the World’s Carbon Sink (web-assets.bcg.com)
4 Tackling Climate Change with Technology (gmo-research.com)
5 Climate Technology in Southeast Asia: Key to Unlocking the World’s Carbon Sink (web-assets.bcg.com)
6 Climate tech (dealroom.co)
7 APAC climate tech outlook seen strong amid funding crunch (Asianinvestor.net)
8 How can the world reverse the fall in climate tech investment? (pwc.com)
9 How can the world reverse the fall in climate tech investment? (pwc.com)
10 24 Rising Climate-Tech Startups in Asia connect with ENGIE
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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