Impact Investing and Clean Technology

Q: Hello Jason! Thank you so much for joining PATA in this interview. To get started, would you mind introducing a bit about yourself and your area of expertise so that our audience can know a bit about you?

Jason: My pleasure and thanks for inviting me to talk with you. My name is Jason Lusk. I am the Partnerships and Communications Manager for ADB Ventures. ADB Ventures is the new venture investment facility of the Asian Development Bank, or ADB in short. ADB is a multilateral finance institution based out of Manila. Historically, it has been best known for financing infrastructure projects across the region. Venture investing is a new activity for the Bank, and ADB Ventures was only just authorized by the ADB Board at the end of January. We announced the first close of our fundraising in April. The purpose of ADB Ventures is to invest in technologies, from startups to early stage companies, that have potential to scale up for impact against the Sustainable Development Goals, particularly for impact on climate across Asia and the Pacific.

My role within the ADB Ventures program is to run a series of what we call Labs. These are programs that are building markets for those impact technologies across the region by working with start-ups, by working with end users of technologies, large corporates, municipal utilities and big organizations like that in order to find where there are real commercial opportunities to scale up tech. Under that Labs platform, I’ve been working with PATA on a program called Travel Lab Asia. Travel Lab Asia is, exactly as I just described, a program that matches impact technology start-ups with the needs of large travel industry corporates across the region, specifically, the needs of large hotels and resorts. And so, we’ve been working with Hilton Hotels, Jetwing Hotels, and Minor International and helping them identify clean technologies that they can implement for better waste management and better energy management.

Q: We all know that the COVID-19 crisis has actually disrupted our global financial system. Why should impact investing remain the key focus for investors during the time of COVID-19? And also, is clean technology still a good investment for impact?

Jason: I’ll answer the second question first. Obviously, the COVID-19 crisis has been a setback, and it’s not that the impact investment funds have dried up. But start-up companies have delayed their fundraising and are seeing lower valuations during the crisis. So certainly, the impact investing industry has gone into a little bit of a pause. But that’s not for the lack of a market for impact investing. The fundamentals remain there. There is a desire by industry to invest in clean technologies and other impact technologies as a way of reducing costs and accessing new customer segments. There are all kinds of commercial reasons why companies are looking to invest in impact. The investor class knows this. The impact investing industry has only been growing globally over the past decade, and it is growing quite rapidly in the Asia Pacific region. So, I think what you’re going to see following the long arc of history, impact investing will go into a bit of a pause, maybe in 2020, continuing into 2021. But we’ll come back robustly in the medium to long term.

I also think it’s important that we do not look at impact investing narrowly as investing in clean tech. Impact investing includes any investments that contribute towards the UN Sustainable Development Goals. That will include health technologies and health outcomes. In the time of a pandemic, that exposes the need for better health care, and that’s especially true for rural and remote areas, where access to even basic healthcare services can be poor. There’s opportunity to invest in technologies that reduce the cost of basic healthcare and also make more advanced specialist services available to rural populations via telemedicine.

And another thing that we’ve seen during the COVID-19 crisis is the need for better healthcare supply chains and distributed healthcare that can respond to disease outbreaks, many of which are climate-related. COVID-19 doesn’t have its roots in the climate crisis and climate change, but Zika would be an example. There are other mosquito-borne or insect-borne diseases that do have roots in climate change. So, the frequency of the need to respond to epidemics and pandemics is not going to decrease as climate change continues to affect our future world. There’s going to be an ongoing need to make sure that healthcare supply chains are resilient and able to meet the needs of the healthcare system during times like this and technology has a role to play there.

Evidence suggests that environmental factors are making pandemics worse and worse. And when the dust settles, I think the greater need for non-healthcare impact technologies would be made clearer by COVID-19. It is possible that governments in the wake of COVID-19 are going to recommit themselves to climate action, recognizing more strongly than ever before that the state of the environment has an impact on human health. It means that I expect governments to increase the incentives for industry to buy into and implement clean technologies that will create opportunities for technology startups and the investors.

Q: When we look at the tourism industry, do you see any opportunities that the COVID-19 crisis can bring to foster impact investment strategies, particularly in the Asia Pacific region, which is well known to be the leader in both tourism industry and green technology investment?

Jason: The response of governments to COVID-19, the recovery packages and incentives that they’re making available, obviously varies quite a bit from country to country. So, it’s tough to generalize. But examining the tourism industry, everyone knows that demand for tourism and the tourism volumes will come back. Just because we suffered from probably the greatest shock ever to the tourism industry, or certainly the greatest shock in recent decades, it doesn’t mean that we aren’t going to return to tourism being a substantial share of the economies of countries in our region going forward. Not every company in the tourism value chain is going to be able to survive this shock. But there’s a strong incentive for companies with the means to try and ride it out. And while they’re riding out the crisis, this is an ideal time to make CapEx investments that are going to pay off over the long term with energy savings, with more effective waste management and with other operational savings.

I think what we’re seeing, particularly for companies that have fixed infrastructure, like buildings, or fleets of vehicles, there is a desire right now or there will be shortly a desire as some of these government bailout programs start to take hold to invest in improving that infrastructure, so that they can realize the operational savings once demand returns. That creates an immediate opportunity for impact technology companies to be a part of those infrastructure or those CapEx investments. And it’s also an indication that maybe while the tourism sector suffers during this crisis, the clean technology and other technologies can be integrated into the tourism value chain. This may actually be a time of opportunity.

Q: To optimize the opportunities, how can impact investing and clean technology contribute to recreate the tourism industry in a more sustainable way?

Jason: There are so many opportunities to make the tourism industry more sustainable through technology. The challenge, of course, is that tourism is a very fragmented industry. You can see relatively few large players and a lot of small players. In hospitality, you have buildings or wherever there are buildings, there’s an opportunity to improve energy efficiency. Improving energy efficiency has a massive impact on our climate. And that’s also the focus of the Travel Lab Asia that ADB Ventures have been collaborating on over the past year. So, that’s one area.

Mobility is another area. Everybody knows that vehicles have a climate impact. Anytime that you can use vehicles more efficiently, that’s going to make a big difference. So, technologies, sharing economy technologies that encourage more people to use fewer vehicles, intelligent routing technologies that help tour companies plan their routes more effectively, save energy and save cost. Financial technologies (FinTech) that enable companies to make capital investments that enable them to make payments more effectively.

Tourism is an interesting industry because more than almost any other industry that’s affected by the global economy, it has an impact on the most vulnerable levels of society. If you think about it, the places that tourists want to go are often the places that are least touched by economic development and where some of the poorest groups live. These are people who often times don’t have access to basic financial services. So, there’s a role for FinTech to play in helping distribute the benefits of tourism more equitably and expediting payments across the supply chain.

More efficient airports, aviation, airplanes that travel farther, with fewer greenhouse gas emissions; airplane meals that generate less waste; less food waste in hotels and on airplanes. These are all areas that are just ripe with opportunity for technology to make a difference and for impact investors to participate in making that happen.

Q: How can we bridge the gap between big and small players in the tourism industry in the access to technology and impact investing?

Jason: This is actually a common question in the realm of impact investing. I think that you’re seeing more and more solutions as a service, and the reason is that small companies, small customers, and customers in emerging markets can’t always afford to make capital investments in the millions of dollars or even in the hundreds of thousands of dollars. So, solutions as a service allow them to access technologies for monthly payments that otherwise, they wouldn’t be able to afford and pay for those solutions out of operations. We’re seeing more and more of that across the board, particularly with building management and energy management systems, even infrastructure for renewable energy, certainly solutions for waste management. And there are some really interesting financial models that start-ups are able to make some of the insurance companies emerge and enable that. So, there’s actually an area of innovation that is creating a lot of opportunities for those small players in the tourism value chain to invest in sustainable and cost-saving technologies that they might not get so much access.

Q: In one sentence, how would you envision the future of tourism after COVID-19 ?

Jason: Tourism demand isn’t dead; it’s hibernating. The tourism industry should use this once in a lifetime chance to implement new technologies and infrastructure that will make businesses more sustainable – and profitable – when demand reawakens.