Impact SEA

The state of Impact by startups in SEA - Fang Eu-Lin, PwC

August 24, 2020 TRIVE Venture Capital Season 1 Episode 1
Impact SEA
The state of Impact by startups in SEA - Fang Eu-Lin, PwC
Chapters
Impact SEA
The state of Impact by startups in SEA - Fang Eu-Lin, PwC
Aug 24, 2020 Season 1 Episode 1
TRIVE Venture Capital

SEA is a rising economic powerhouse with 9.34t USD in combined GDP in 2019, close to two-thirds of China’s GDP.

But are sustainability and impact efforts sufficient in matching the trajectory in GDP growth? And what can technology startups do to improve the growth of impact efforts?

In today’s inaugural episode, I speak to Eu-Lin Fang, Partner at PwC Singapore, who is in charge of Sustainability and Climate Change Practice, for her insights. 

Show Notes Transcript

SEA is a rising economic powerhouse with 9.34t USD in combined GDP in 2019, close to two-thirds of China’s GDP.

But are sustainability and impact efforts sufficient in matching the trajectory in GDP growth? And what can technology startups do to improve the growth of impact efforts?

In today’s inaugural episode, I speak to Eu-Lin Fang, Partner at PwC Singapore, who is in charge of Sustainability and Climate Change Practice, for her insights. 

Christopher Quek:

You're listening to Impact SEA. Episode one, the state of impact by startups in Southeast Asia. Southeast Asia is a rising economic powerhouse with $9.34 US trillion in combined GDP in 2019. That's close to 2/3 of China's GDP. But are sustainability and impact efforts sufficient in matching the trajectory in GDP growth? And what can technology startups do to improve in the growth of impact efforts?

In today's inaugural episode, I speak to Fang Eu-Lin, partner PWC Singapore, and sustainability and climate change leader, for her insights.

Hi Eu-Lin, nice to meet you here today and thank you so much for being on our inaugural potcast of Impact SEA. You put on your title, sustainability and climate change leader. It's your work all about just saving the earth? Tell us more.

Fang Eu-Lin:

Great to be here, Chris, and thanks for having me in your inaugural podcast, I should be the one that is very honored to be here. That's really just a title. But now maybe I could share a little bit more about the stuff that we do at PWC in the sustainability and climate change team. Likewise with other professional firms, we offer sustainibility services or consulting services as well and we really try to apply our global, deep knowledge and expertise to find solutions. Actually, if you take a step back, what's really PWC's purpose, right? Our tagline is to build trust in society and solve important problems, helping the so called actors in a society, that business of government in solving sustainability and climate issues and it's really an important problem that we wanna try to solve.

But we can't solve these issues in a sort like a broad manner. These issues are really not easy. I'm really glad that you even mentioned to me that more of the startup space, you want to look into the issues as well. It's not easy, but it's great that we have more stakeholders involved. It requires science, data, good governance, and ideas as well. Ideas which we think the key that can populate from the startup industry. So that's why part of our work involves, but really making sure that organizations across the ecosystem get the foundations right, and what do I mean by that? They measure the carbon footprint, they have a realistic plan for decarbonization, they assess physical and transitional risks of climate change, they look at policies across not only environmental, but social and governance as well, they looked green finance to help them to grow and they help them to and also to develop regulations amongst others. So that's in a nutshell what I do there's a lot more, but I guess it's just a bit of insight on that one.

Christopher Quek:

It's actually sincerely, quite overwhelming hearing so much of it. Basically what I actually would like to add, I remember there was a little conversation that we had previously where you introduced me about sustainability. You mentioned something about the 17 UN sustainable development goals. Are you able to just help explain a little bit more about how sustainability and impact in Southeast Asia mean to you based on this kind of framework?

Fang Eu-Lin:

Yeah, I'm really glad that you mentioned about the UN SDGs. They have a goal, as you mentioned. It's like 17 goals, right? They've really simplified it and it's a great and well accepted platform to identify what are the needs on different countries, and this platform helps you to set goals, set targets, and also how to measure this progress within the 17 goals.

But as I said, they simplify it into 17 UN SDGs. But underneath that right there are 169 targets. Each of them, I guess, have a different importance in different jurisdictions. Maybe just to lay it a bit more, Right? So under SDG4, which is equitable education, under that you have a target, which is 4.3, which is to afford affordable technical, vocational, tertiary, and university education. And that underneath that is like, how do you measure it, right? Which is 4.3.1, which one of it is participation rate of youth and adults in formal and non formal education, and also by gender, so actually quite detailed. So the UN SDGs are detailed, they're not purposely detailed. They need to be like that so that they can be effective.

I guess the other thing that I really appreciate about the UN SDG, which I alluded on earlier, is that it helps you to identify what are the greatest needs in respective countries, and also in Southeast Asia, as you mentioned. So maybe if you bear with me, right, we have this really cool tool by PWC called the UN SDG selector. It helps to just, I guess, organize the data so that you can see right, by different countries, also in southeast Asia, what are the greatest SDG needs? So in Indonesia, it could be SDG5, which is gender equality, SDG6, clean water and sanitation and SDG15, life on land. In Myanmar, SDG1, which is no poverty, SDG2, zero hunger and SDG4 ,education, just to name a few.

So coming back to this as a podcast on startups on impact. If you really wanted to make an impact on Southeast Asia, there's so many opportunities. And the SDGs is a great platform, is a great tool to be able to, I guess, guide you in how to actually go into the areas that will help you to make the impact at the same time, I guess allow your startup to flourish.

Christopher Quek:

That's really a lot of great information that you're just shared. I think maybe to help our audience a little bit more, what do you think are your two favorite major issues in Southeast Asia that you think startups should be focusing on?

Fang Eu-Lin:

I think that the issues in Southeast Asia and around the world, they are far too complex, and they are far too variegated to say that these are the major issues, these other minor issues. I'll give you an example. In Indonesia, the issues in Jakarta, for example, is very different from another province like Jambi, right? And if you, let's say you use a tool, the SDG tool, you'll find that if you go down deeper, the needs of the population environment in Jakarta are very different from Jambi. So I don't think that there are just a bunch of major issues that Southeast Asia face. So I think you will need to do a bit more research in depending on which jurisdiction that you're wanting to actually offer your services.

Another point I wanted to make as well right, is that this whole area is moving very fast so the issues evolve from time to time. I think Covid, Covid-19 has actually had a big impact on this as well. I think it's a reset and we can do things better a little bit better given this reset. But I just wanted to make the point that you know many heard about Nassim Taleb Black Swan, right? But many also in the community think that actually, are you sure that Covid-19 is a black swan? Many share the view that actually Corvid-19 is actually a grey Rhino, and what do I mean by grey Rhino? So a grey Rhino is something that's big, presumably far away at first, but it's still charging towards you and people have been warning in the past about this and we know the real possibility of this happening, a grey rhino.

Actually, many view that climate and sustainability is another grey Rhino, but a much bigger grey Rhino. The science points to it. We're already seeing signs of it. But what are we gonna do about it? I mean back to questions, what is it that we should be focusing on? I think many people are trying to focus on how is it that we can build back better. I mean Singapore as well, they got the emerging stronger task force. They're also thinking about how to build back one of the streams which is sustainability, which is great, you've got lots of resources available so that investors right or start up can actually think about where is it that can actually go into, which is a flow area rather than apt area and where is it can make the most impact?

So just a quick one, right? There was a recent report that came out in June 2020 from the IMF and IEA. It's a very good read, only 174 pages on sustainable recovery. In this literature, they describe what governments and businesses care about, focus on when we build back better, the information is pretty rich, right? And they also show, or did some research about what are the areas, where you can create the most jobs, a minimum of dollars spent.

What are the abatement costs, right? A cost to reduce carbon emissions, per CO2 ton. So if you look at, I wanna build back better, going to areas which can create jobs. At the same time, I can create jobs, but reduce the carbon footprint. It points to a few areas. So the study shows that some of the areas, unsurprising is like solar PV utility, which helps to address those two dimensions and then there was also a book that was recommended by a good friend called Drawdown, which looks at the different types of green solutions, or sustainable solutions, and what are the pros and cons, the cost of features from? But it's coming back to your question, sorry, is a long winded answer to your question. But there is so much out there and also in Southeast Asia to do. There are lots of opportunities, but I think one, if you are trying to set up a business or give it to another area, I think you need to be very up to date about the changing environment of these issues.

Christopher Quek:

Wow thanks so much for all that powerful resources that you were mentioning about different reports. I'll definitely make sure that we'll put all those resources at the bottom of all the polls for people to go click on. I just wanted to sidetrack a side a little bit on the point that you mentioned about Covid-19 being a grey rhino.

Now here's a very big question that everyone's always been asking, has Covid-19 also started to impede sustainability efforts going forward? Because do you count this as a distraction? Do consider this as the impediment? Or you considered this is even an acceleration for sustainable kind of efforts that we are doing now?

Fang Eu-Lin:

I think that some people are saying that now that Covid has happened, our carbon footprint should be smaller, and therefore we don't really need to do that much anymore. I would have to say that if you look at the net carbon reduction during the Covid period is expected to be about to 8%. And this is contributed by, as I say, it's net because you have a huge reduction in terms of the air transport and also transportation, and also office buildings to certain extent. But what's increasing is our home footprint. By net its about 8% and I think that in the past where we have gone through economic crises, and I'm not saying that Covid-19 is a similar economic crisis. Corid-19 is very special. It is a health care issue that has turned into an economic crisis, which might turn into a humanitarian crisis. So it's different.

But I'm just taking a leaf from the previous financial crisises. It shows that after when economy starts to open up businesses to grow again, the carbon footprint actually accelerates hugely. So this is a chance for us during this period to say, how is it that we can build back better, not go through the same other financial crisis or where we see a huge tick in terms of carbon emissions. So I would say that some people, yes, said that, yes, maybe we don't need to do too much anymore. I think we need to go back to the data and also history to see how human beings will also react. And given that those 2020 hindsight moments, and no pun intended, how is it that, we can change this time now.

Christopher Quek:

For me, I guess with this whole Covid-19 and with sustainability solutions all coming into play. For yourself, you have been exposed to a number of solutions. Have you ever seen any creative tech solutions by startups in resolving issues like perhaps with Covid-19 or anything that is within the sustainable impact in southeast Asia.

Fang Eu-Lin:

I think I'm probably not in the place to actually mention, particularly the specific companies. But I'm seeing really quite a fair bit of interesting startups in, say, the meat substitutes area.

Christopher Quek:

Meat substitutes? Okay.

Fang Eu-Lin:

So could be seafood substitutes, for example right? And on the newspaper today, in Straits Time, or was it yesterday? They talked about milk substitutes as well. So I think Singapore is quite focused on the food in every area and I think that quite a lot of good startups in this area as well. And the other point is also we have to, I guess, leverage what we're really good at, and education is something that we are really good at. That's something that we can do more on tech companies, perhaps.

Christopher Quek:

I actually want taking a follow on question to that. How would you measure the impact and effectiveness of meat substitute companies? Are you able to give us like an idea of what exactly are the KPIs in impact measurements, Should we be looking at?

Fang Eu-Lin:

Yeah, sure. I do a lot of work in terms of impact. And I have to say it is no walk to the park, if you want to measure impact properly. Firstly, you need to establish what is it that you're trying to achieve,you need a goal, a target. So SDG provide you that goal. But other than that, do you have your own goal? So in the climate area, you got science based targets, right? Which I guess helps you to define what really should be your targets in your given industry, or the organization that you're in. Then you really need to go into differentiate what are the outputs, the outcomes, and then the impact. You need to get good data to measure this impact. You need to get good data to actually understand why the counterfactuals as well. So some folks think that impacts just a simple assessment, right? They could get confused. Impact are also outputs or outcomes. But not to worry. There's a lot of good literature out there, say, for example, the start up wants to go into something like a sustainable solution of green solution, and they wanna start to measure the impact because they also want to show, right, the impacts they make.

A good framework would be platform, as would be like the global impact investing network and many have heard of that. And also the impact management project, which are used by many investors. So that looks at what, who, how much contribution and risk of the impact as well. I would say that if you really want to be serious in this area of impact as part of your business, you need to start getting good frame works and also good data to help you to measure impact.

Christopher Quek:

Thanks much for that. I'm just thinking through one of the challenges for startups is that they are very resource constrained. How much do you think enough is enough in terms of an example of producing the impact literature, the impact measurements? Because I guess a number of them when they saw the impact framework, they found a lot of information is needed to be put in. Is it maybe possibly just looking at just four to five areas for measurements, If I might say, KPI is sufficient or because of the current frame works that i've been seen so far like you said, I think there was some with about 170 over KPI and I think that really frightens off startup when we talk about we want to go into impact. What do you think is the best middle ground for them to kick start in a very comfortable manner?

Fang Eu-Lin:

I do think that they need to come up with a few in line with the business.

You don't need to, I guess, do 10 or 20 at the outset, but something with a few people in and adding on over the years. After a while, it's, you need to look at the materiality as well, which are the material wants, cause everything else, if you handle these few, it could be just two or three, right? But if the material enough, I think that's something that you can just continue to measure. But I understand the size that in startups is one person doing many jobs at the same time, I recognize that. But I think that the good thing about the whole impact world, the whole sustainability world is that there is a lot of literature out there. So you do have information for you to just do it yourself. As I said, based on materiality, identify those which are material for you, and then stick to those, and add on, if you must, as your business changes as well.

Christopher Quek:

That's very, very good advice. And I actually wanted to move to the last question that I have for you today. What other advice do you have for startups who are very interested in working with businesses in southeast Asia? What do you think is the best way to showcase and to portray impact businesses? Because as you know, businesses in Southeast Asia, are still very traditional in nature, for them is more about financial survival rather than impact. Is there any advice that you can give to startups and how they work with businesses here?

Fang Eu-Lin:

I do think that the world is changing. So financial sustainability is very important because that create jobs, right? But to completely ignore the sustainability aspects also I think it's dangerous. We are increasingly, I'm sure you see yourself as well seeing managing sustainability as both a business opportunity and also being able to have a license to carry out business. There are lots of regulations coming up which require more sustainable solutions. For example, a carbon tax requires you to, I guess, improve in terms of our energy efficiencies across the value chain. So if you're not really ready for these regulations that I believe there will be more and more sustainability related regulations that might put you on the back foot.

At the same time, I think that you would have to manage all these impact kind of expectations and also sustainability risks, even if you're wanting to go, starting up a business in the sustainable or green business. So I can give you an example quite early. Recent one, where there was a solar company that was being put in a developing country and they are doing very well. This is a green business right? Solar business. But the business itself was not sustainable, did not consider other sustainability areas such as taking care of workers needs and the unions and what happened was that the workers revolted and they started to smash the solar panels. So not looking at your ESG risks or the way you impact the community as a business, might also impact your own business, even though your business might be a green or a sustainable solution.

I guess the final point is that many investors we look at, the southern wealth funds, the pension funds. They have all put it out there that they're very serious about the companies who create impact. Even right, the type of private equity or BC's, they are serious about this. Many of them actually subscribe the UN principle of responsible investments on UN PRI, because of this of there against their mandate and so their alignment they get here, they're looking at UN PRI on the due diligence lenses, we are getting more and more impact funds out there as well. At the same time as over and above the due diligence, I think they also have expectations of an ongoing basis, the ESG and impact practices of their potential invested companies as well. So I would say that back to a question about advice, right? I think, yes, financial sustainability is very important, but not to look at the other aspects of impact and also ESG might be risk to you well, and might be risk to you when you want to go your business bigger, want to get in more investors also, because the tights are changing.

Christopher Quek:

Thank you so much for all these that you are shared with us today. Really, thank you, Eu-Lin.

Fang Eu-Lin:

My pleasure.

Christopher Quek:

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