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Cleantech Investment In Asia « Back
Selina Harrison, February 2010
As a consequence of the financial crisis, global cleantech investment activity has declined during the past year. Asia has not been immune to these reduced investment levels, but many countries in the region have economies in boom, as well as governments that are committed to supporting cleantech development. As such, the Asian cleantech sector continues to offer some attractive long-term growth prospects.

Indeed, cleantech investment in Asia is likely to be robust in 2010, as governments continue to adopt initiatives and stimulus packages to promote energy efficiency throughout their economy. In addition, international funds, such as the World Bank and Asian Development Bank (ADB), are providing additional sources of capital for technologies and projects. These elements are conducive to growth within the sector. “The number of energy management companies and energy service companies is continuing to increase, facilitating financing opportunities for development stage companies.

The overall political and social environment in Asia is thinking clean. Pollution is politically incorrect; energy efficiency in all sectors commands the day,” says Barbara Jones, shareholder at Greenberg Traurig LLP. This is more pronounced following the Copenhagen summit.

Economic growth, energy security and the development of a sustainable living environment are key drivers behind the rise of cleantech and renewable infrastructure investments, according to David Cox, counsel at Allen & Overy. Many governments in Asia are keen for local companies to become global leaders in the development and commercialisation of cleantech, which will be an engine for significant GDP growth in the future. It is also a means of gaining greater security over their energy resources, and many Asian governments are now aiming to reduce their reliance on imported hydrocarbons, and to utilise their domestic resources more widely. But there are also other incentives. “China, is already seeing significant adverse health impacts from high levels of pollution, and reduced economic growth in some areas caused by insufficient water resources, so creating a clean and sustainable living environment is vital and an important driver of cleantech investment, says Mr Cox.

Ample investment, ample opportunities

According to a report called ‘Rising Tigers, Sleeping Giants’, published in December 2009 by the Breakthrough Institute and Information Technology and Innovation Foundation, Asian countries are forecast to outspend the US on clean energy technology and infrastructure by a factor of three to one by 2013. The report also states that between 2009 and 2013, the governments of China, Japan and South Korea will invest $519bn in clean technology, while the US government would contribute $172bn in the same period. In the next 10 years, China alone will spend between $440bn and $660bn on cleantech investment. “Asian countries want to be at the forefront of the green industrial revolution, acting as provider not as beneficiary of the next generation of technology,” observes Mr Cox.

Indeed, China has already established itself as a leading manufacturer of solar PV and wind turbines. It is also making its mark as a leading developer of hybrid and electric vehicles, and has demonstrated repeatedly that it can develop a domestic industry utilising existing technology. Furthermore, the cost-effective export base, and the rapidly growing economy, coupled with its focus on modernisation of the industrial and domestic sectors, will push energy demand and consumption to record highs, providing great opportunities for investment. Vitally, such opportunities are encouraged by the government, which “has actively supported the growth of such cleantech superstars as SunTech, Yingli and JA Solar,” says Ms Jones. “In the current economic climate, these initiatives are particularly important to spur new technologies until international investment returns to acceptable levels,” she adds. However, investment in China is not without obstacles. The legal and regulatory environment is not as well developed as in some other Asian countries, and there are limitations on investment structures and problems with protection and enforceability of intellectual property rights. However, China is working hard to address the issues that foreign investors struggle with, particularly in relation to intellectual property protection.

Aside from China, other countries in Asia that provide a sound environment for cleantech investment include India, whose cleantech market is expected to witness ample activity this year. For example, Khosla Ventures, a $1.1bn fund raised last September, is expected to invest heavily there, with particular focus on wind, small hydro, solar and biomass energies. In addition, Japan and Korea both have an impressive track record in developing and commercialising new technology. Similarly, Singapore has an excellent reputation for developing high-tech products and applications. These countries have well-established legal systems with rules governing investment, corporate governance and intellectual property protection, making them attractive investment destinations.

However, it should be noted that solar and wind technology is now suffering a degree of overcapacity, although there is scope for further investment in second and third generation solar PV technology. But other options are plentiful – for example, across Asia, transportation is a significant focus of government research and investment policy, so hybrid and electric vehicles, high-efficiency batteries and related technology are seen to be key technologies for a low carbon economy, and investment in this area is expected to be plentiful as a result. Particular focus will be on smart mobility, demand-side management systems and energy efficiency (including building materials), with communication and information technologies leading the way. Finally, solar cells, advanced battery technology and LEDs will help to round out investment targets in the Asian market.

The helping hand of the state

Numerous funding initiatives and have been implemented by governments throughout the region in recent years, even in developing countries such as Sri Lanka and Thailand.
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