In recent years hackathons, innovation challenges, investors, and venture capitalists are constantly targeting start-ups who use technology to achieve the Sustainable Development Goals (SDGs).
Governments and businesses are searching for solutions to help the underbanked and increase financial literacy. One of the solutions is Fintech, one of the leading sectors in this area, as well as the Agriculture technology (agritech) sector that can resolve food security issues the effect of climate change on farmers.
“I think there is recognition in capital markets, especially on the venture capital (VC) side, on issues around sustainability, whether it’s to do with economic development, social issues, or the climate and environment.
“These are becoming big problems in the world. And for VCs to make money, we fund enterprises that are tackling the biggest problems,” says Paul Ark, adviser for Gobi Partners, a VC focused on Asia.
In Malaysia, private sector investment opportunities in the most concrete, infrastructure-focused SDGs (6, 7, and 9) are worth US$35 billion, according to the Standard Chartered SDG Investment Map published in 2020, with the greatest opportunities found in developing the transport sector.
In 2015, all United Nations member states adopted the SDGs as a global solution to end hunger, protect the earth, and guarantee stability and prosperity for all by 2030.
“It’s nice when a start-up solves a problem that is difficult or has global attention, such as those in healthcare or education. [If the start-up can solve the problem] then it could mean that it has huge potential. The start-ups that I’m attracted to are those that are trying to solve these long-term, ongoing problems on a big scale,” says Melissa Foo, vice-president of Malaysian Business Angel Network and an angel investor.
In particular, the 2020 events have emphasized the demand for strategies that address the SDGs, Ark states. The wildfires in Australia and the US, for example, exemplified the effects of climate change, while the pandemic focused attention on issues of food security and the lack of equal access to education and healthcare.
According to reports, investment dollars poured into education technology (edtech) and healthtech start-ups that allow remote learning and health services at a staggering rate last year.
“There is a market out there to be served. We have been working on innovative solutions to achieve the SDGs, focusing on financial health as an intermediate outcome. This becomes especially important when we focus on rebuilding in a post-Covid world,” says April Khor, innovation lead for financial health at the United Nations Capital Development Fund (UNCDF) Malaysia.
Matt van Leeuwen, chief innovation officer of the Sunway Group and Director of Sunway iLabs, states that several prosperous businesses, such as Uber and Airbnb, were launched during the economic crisis. “There is a similar window of opportunity for start-ups now, but the only difference is that this time, it is a huge opportunity for start-ups that address the SDGs.”
Simultaneously, SDGs-addressing technology start-ups are becoming more financially viable.
“Traditionally, investors always felt that there was a trade-off between financial returns and impact. But years of investment return data is showing that when it is done well, impact or sustainable investing can produce superior investment returns,” says Ark.
Companies that are not sustainable could be cut off from sources of financing or avoided by customers in the future.
“We are in a transition period, from when addressing the SDGs was a nice-to-have to when it is a must-do. If you want access to capital and consumers, particularly millennials, who are voting with their dollars, [you have to change],” says Shannon Kalayanamitr, partner at Gobi Partners.