[Article] VCs bet big on ESG startups

May 25th, 2020Source : Singapore Business Review
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Even though this year’s list shows that deeptech startups are still dominant, given the Government’s efforts to boost the flexibility of its operations in Singapore, investors are turning their heads to startups that are focussed on environmental, social and corporate governance (ESG). This comes on the back of increasing awareness towards sustainable and environmentally-friendly solutions.

For instance, 12th placer SEPPURE offers chemical separation processes that can be done without heat and at 90% less energy. It claims this can potentially conserve billions of gallons of water, millions of tonnes in volatile organic compound emissions, and billions of tonnes of carbon dioxide emissions annually. Another sustainable startup is abillionveg, a platform that allows users to search for highly reviewed plant-based food and where to find it around the globe.

Other noteable startups in the ESG sector are Karana, a Singapore-based food tech company using minimal processed vegetables to create meat alternatives; and Trishaw Treats, which produces snacks out of vegetables and uses packaging means that fully dissolve in 12 weeks.

In Enterprise Singapore’s study, investments in the urban solutions and sustainability domain surged 56% YoY during 9M 2019 to $150.4m, which can be attributed to increasing attention on cleantech and sustainability.

Specifically, the report noted that there is a growing interest in agri-food tech startups in this sector, where investment reached $28.3m, up from just $0.75m in the same period of 2018. This is said to be in line with the government’s push to develop Singapore into a leading food and nutrition hub in Asia. SEEDS Capital, Enterprise Singapore’s investment arm, appointed seven co-investment partners in January 2019 to catalyse more than $90m worth of investments into agri-food tech startups.

Christian Cadeo, managing partner at ESG-focussed VC fund Big Idea Ventures, is attributing ESG's rising fame on Singapore's goal on making 30% of the region's food home-grown by 2030. "I think [the ESG sector] is going to be massive as we are seeing that Singapore government is focussed on food as being one of the key pillars for security for the country. Because of this initiative, the future is bright in terms of companies that can work towards accelerating the country's goals to achieve this."

Apart from this, some investors are beginning to see ESG investments' long-term impact.

“ESG investments are gaining traction because many of the limited partners have realised that for long-term growth, ESG is an important pillar and whilst many investments may not tick off each of the ‘E’, ‘S’ and ‘G’, starting off with at least one criterion, it can lead to expanding the investment to others,” vice chairman of Business Angel Network of Southeast Asia (BANSEA) Ramesh Raghavan said.

Engagement from foundations and institutional investors, such as pension funds, is also starting to become more interested in long-term impact over short-term gains as well.

"I think even on a macro basis the VC world is on a risk-off environment, but VC that have the long-term foresight will realise that this is the optimal time to make investments in ESG," Cadeo continued. "[I]t is the right opportunity for us in light of the global pandemic that our sector will be the most relevant in terms of impact moving forward."

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