“Does anyone here believe that we are in a position where we need to be to win the battle? The answer is no.” Departing US Special Presidential Envoy for Climate John Kerry drove home this hard truth during a climate financing panel at Davos 2024, which is why social investors play an even more critical role in getting us a fighting chance in today’s climate crisis.

Climate financing has always been at the top of any global sustainability agenda, given how it is a crucial component for countries to go from mapping strategies and targets to taking committed action. This is no small sum – a staggering US$5 trillion of capital is needed each year by 2050 for us to meet climate goals. This is even more pertinent here in Asia for several reasons – not only does the region generate the largest share of emissions globally, but it is also the most exposed to extreme weather events. 

Meanwhile, technological advancements to both mitigate and adapt to climate change have been moving in leaps and bounds. Communities can better adapt to droughts and floods with the help of climate-smart agriculture, while intelligent weather prediction tools help protect infrastructure and human lives from storms, floods, and heatwaves. 

However, the investment needed to scale these innovations remains insufficient and unevenly distributed, with the focus largely on emission reduction efforts, and funds disproportionately benefiting high-income countries in Europe, the US, and Canada. 

This imbalance in adaptation financing is due to several barriers, such as high upfront costs, perceived risks and uncertainty, lack of established commercial markets, and limited access to knowledge of the opportunities.  In turn, the widening gap between rising adaptation costs and limited financing leaves at-risk countries in the region severely under-resourced.

Patience needed: Turning risk into opportunity

Social investors – investors who combine financial returns with social impact by backing companies and funds with a social purpose – are in a unique position to step in. To achieve the progress we need to see with climate action, social investors’ active role in climate financing is vital, bringing to the table not only a unique risk tolerance needed for adaptation financing but also providing value beyond financial support through impact-focused alliances.

Firstly, social investors can provide long-term capital that is patient, risk-tolerant, concessionary, and flexible. Indispensable for nurturing high-risk climate adaptation innovations, their unique risk tolerance is crucial for this emerging yet vital ecosystem. 

Social investors achieve this by deploying a variety of financing instruments, from patient equity to innovative blended finance structures, meeting the diverse needs of climate tech startups while de-risking investments for mainstream capital. For instance, the long development cycles of breakthrough agri-technologies, like climate-resilient crops, require equity financing with a 10 to 15-year horizon.

The role of social investors is not simply limited to financial support. For climate adaptation technologies to be successful and have on-ground impact, adequate policy and institutional mechanisms need to be in place to facilitate swift technology transfer and implementation.

Research reveals that climate adaptation technologies are deployed at a much slower rate (16 percent) compared to mitigation solutions (31 percent). This shows that while mobilizing financial resources and addressing regulatory barriers are important, these technologies need to be deployed in a targeted way in order for any investment to make a real difference on the ground. Social investors can contribute on this front through capability building and collaborative networks essential for climate tech development and knowledge transfer.

Creating real value with impact-focused alliances

Precision in operationalizing adaptation technologies is crucial, complemented by knowledge sharing and increased access to risk capital to unlock innovations tailored to local needs. Building impact-focused alliances between governments, investors, and communities can significantly accelerate these efforts, particularly given the patient and catalytic nature of the required capital.

We see all this come to life in recent climate initiatives, such as AVPN's Sustainability Seed Fund, which exemplifies the potential of social investors to accelerate climate tech innovation, through tailored financing instruments, capability building, fostering collaborative networks, and research to identify gaps in the ecosystem to enable better-informed investments in this area. 

By providing early-stage grants and technical assistance, the Fund catalyzes the development and deployment of impactful yet commercially viable solutions. Such pioneering efforts by social capital can nurture the next generation of climate adaptation innovations across Asia Pacific, while also bringing together the necessary implementation capacities and technical expertise across the ecosystem.

Bringing more social investors into the fold

There is sufficient evidence demonstrating that social investors have made considerable contributions in the climate arena. The first iteration of the Fund, supported by Google.org, provided US$3 million to help 13 grantees, from renewable energy and sustainable technologies along the Thailand/Burma border to a ‘Digital Twin’ of the global food system. However, all stakeholders – from governments to communities – need to make a concerted effort to bring social investors to the frontlines. 

Ultimately, the longer we delay meeting climate investment needs, the higher the costs will be, both to mitigate the global temperature rise and to deal with its impacts. Growth in public investment to meet climate challenges will be increasingly limited for emerging markets and developing economies, and so the private sector will have a bigger role to play. 

Social investors hold the key to unlocking the potential of disruptive climate technologies tailored to the region's needs, so let us do more to bring them into the fold, and collectively work towards ensuring a resilient, inclusive, and sustainable future for Asia Pacific.

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Aravindan Srinivasan is the Director of Thematic Collaborations at AVPN, the largest platform in Asia that connects investments in the region to important social causes. The opinions expressed in this article are his own.