Venture capital (VC) firms are optimistic about APAC’s potential investment growth, bolstered by Hong Kong and Singapore’s positioning as strategic hubs for sustainability-focused investing. To help VCs stay ahead of the region’s unique market and regulatory challenges, Novata recently held a webinar exploring the emerging sustainability trends and standards in Singapore and Hong Kong.
The session was moderated by Kyle Flick, Head of APAC at Novata, and featured a roundtable discussion with panelists Henry Philipson, Director of Marketing and Communications at Beringae; Sarah Chew, Impact Analyst at TRIREC; and Kimberly Lam, Associate Director of Venture Investments at HSBC Global Asset Management.
Read on to learn the key takeaways from their conversation, including regulatory developments and actionable strategies VC firms can apply to remain competitive.
1. Sustainability Adoption Has Taken Root for APAC VCs
Europe and the UK remain ahead of the curve when it comes to investor appetite and maturity levels for sustainability, but the panelists acknowledged that intense regulatory pressures likely played a role in advancing its adoption in the venture capitalist ecosystem. While best practices from the West are a good reference point for the burgeoning APAC sustainability market, Beringae’s Henry remarked that specialization is required to match the specific cultural, geographical, and material needs of the businesses and funds operating in the region.
For instance, in key financial hubs like Hong Kong and Singapore, commercial interests and bottom-line growth drive major investment decisions. But sustainability is increasingly viewed as a valuable risk mitigation tool, while robust sustainability policies are a prerequisite to qualify for government funding programs in Hong Kong. While the extent to which sustainability influences final investment decisions in APAC remains unclear, these shifts reflect how sustainability is being incentivized as an enabler of powerful business and financial value.
2. Sustainability: An Investor Deal Breaker and a Deal Maker
Investors will continue to demand sustainable investments. According to a BCG survey of 230 ECDI members, 70% of LPs believe companies that effectively manage sustainability will command a valuation premium, with 85% expecting to increase their prioritization of sustainability-related issues over the next three years.
The panelists also touched upon how sustainability considerations can be a stumbling block in closing deals, a valid concern in VC’s fast-paced, hyper-competitive environment. While HSBC’s Kimberly shared that glaring risks, such as a lack of a sustainability management framework, have historically affected deal velocity, she reaffirmed that this stringent due diligence process is critical for identifying material risks and establishing the right policies to address potential liabilities before moving forward. Beringae has a similar process, with the firm instead capturing ESG performance benchmarks at the point of investment using the ESG_VC framework. This upfront sustainability groundwork often pays dividends during exit valuations, with both Kimberly and Henry highlighting success stories of how strong sustainability practices sealed the deal for multiple high-value acquisitions.
3. Beyond the Metrics: Reporting Should Show Tangible Portfolio Impact
Although many VC firms recognize the significance of sustainability reporting from both a financial and regulatory perspective, TRIREC’s Sarah noted that there is still a disconnect between data collection and the ability to translate metrics into actionable insights. Compounded with the fatigue from the volume and complexity of LP requests, there is increasing pushback from firms to understand what LPs are doing with the data and how it contributes to measurable performance improvements. “The real impact in all of these initiatives is to drive meaningful value creation within our portfolio companies, not just as some reporting or compliance tool,” Henry advised. With both Singapore and Hong Kong moving forward with ISSB-aligned sustainability standards, this mindset shift lays the foundation for more intentional, performance-oriented sustainability efforts when it comes to future reporting cycles.
In the world of sustainability, it’s easy to get caught up in regulatory disclosures, vague acronyms, and changing definitions. To ensure that sustainability considerations are embedded appropriately for startups and their relevant development stage, our panelists shared the following best practices for portfolio company and investor engagement:
Equip, empower, and educate your portfolio companies
Many startup founders may not be familiar with sustainability concepts, and it can be challenging to make sustainability a priority in the board agendas of fast-growing companies. Providing a robust and cohesive program of support for portfolio companies, be it a library of educational resources, access to an experienced advisory board, or facilitating peer-to-peer knowledge sharing between businesses, can help companies feel empowered and engaged on sustainability matters. This not only shows a VC’s genuine engagement in supporting their portfolio companies, but also leads to more informed decisions that can help with long-term value creation, innovation and risk mitigation.
Put internal engagement initiatives in place
Internal capacity building should not be overlooked when it comes to successful sustainability integration. As Henry noted, many investors may not have the time or resources to fully understand the nuances of sustainability. By offering internal training programs and educational sessions that fill that gap, investors gain the language, knowledge, and confidence to discuss sustainability in boardrooms and understand what to look out for in investments.
The Future of Venture Capital in APAC Is Sustainable
The forthcoming implementation of ISSB standards in Hong Kong and Singapore, coupled with the growing emphasis on sustainable investment, provides both challenges and opportunities for VC firms operating in the region.
Staying competitive requires firms to stay informed and prepared for these shifts. Novata empowers VCs and their portfolio companies to confidently navigate sustainability at any stage of their journey, and our expert Advisory team will ensure that the right strategies are in place for true impact that matters.
Watch the full webinar replay here, and reach out to our team today to learn more about what Novata can do for you.
