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Plenary 3: Sustainable Development and Green Business Creation 2020-11-27조회수:225

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[Plenary 3: Sustainable Development and Green Business Creation]

Moderator
- Ji-hwan Lee (Professor of KAIST College of Business)
Speaker
- Professor Seonghoon Kim (Professor of KAIST)
- Jeong Tae Kim (CEO of MYSC)
- Jinsuk Kang (Team leader of ENVELOPS)


- Ian de Cruz, Global Director of Partnering for Green Growth and Global Goals 2030 (P4G) (Video)


The third plenary opened up with an introduction of P4G. Ian de Cruz, Global Director of P4G, has sent a video for the occasion. He explained the venture capital approach of the organization towards market transformation: First, invest in partnerships; second, drive the change on the ground; third, unite the partnerships through high-level convening. 

Director Cruz also mentioned that getting to zero coalition, e-mobility transition, and sustainable special economic zones show opportunities to invest in impact, in Korea. Moreover, the 2021 P4G Korea Summit is said to be the major accelerator moment for P4G partnerships and for Korean companies to display their leadership in sustainable growth. The video ended with the message that we’re “Always and always better together”.


- Professor Seonghoon Kim, Professor of KAIST


Then the talk was led by Professor Seonghoon Kim on why we need startups in the field of green energy and what kind of measures we need to succeed in the industry. He noted that we’re currently facing an ICT-based convergence. The conservative energy industry was no exception to this trend. We’re now at the stage of introducing the concept of negawatt, which means that energy savings could be regarded as power generation, and the electricity saving system (ESS).

Next, he explained that smart energy platform is comprised of energy big data, cloud, and energy IoT. If we implement this to the realm of renewables, the platform can help improving the efficiency through systematic management of photovoltaic plants. Collecting, analyzing, and utilizing the data and can also lead to new business opportunities.

Professor Kim then turned our attention to the status quo of startups. From 2009, almost 500 unicorn startups have appeared in the market; Airbnb, Uber, and Zoom to name a few. In Korea, there is more than 20 unicorns such as Yanolja, Coupang, and so on. However, he pointed out that there’s no single unicorn in the green business domain. To our relief, the Korean government is launching the Green startup 2000 project to foster 2000 unicorn startups by 2025. 

Lastly, he emphasized the importance of innovation in order to survive as a unicorn because many startups fail to escape the death-valley even with good value propositions and profit models. He proposed the smart energy platform as one option for startups in order to establish a decacorn business model in the market.


- Jeong Tae Kim, CEO of MYSC


The plenary continued with the topic on impact investment and corporate social venturing by Jeong Tae Kim, CEO of MYSC. He started out by noting the mission of his company which was to create a better world through impact investment. However, while he was introducing Root Energy, he noted that it was the only example of a green startup among their portfolio.

He also mentioned that from the ESG (Environmental, Social, and Governance) perspective, new market creation is crucial for social ventures because revenues could be generated from the current non-market areas. Moreover, if the ESG perspective could help adapt to the highly volatile green business domain, it could also lead to profitability in the market. The question is how to support the small social businesses.

Mr. Kim introduced another startup named Injin, a wave power generation company. Their technology enables power generation regardless of weather and has been implemented to create a carbon free island in Vietnam. These kinds of projects require new investments, however, have the potential to deliver freshness among the blue ocean of existing companies. He suggested partnerships between startups and larger companies so that the former could fully utilize the opportunity to scale up.


- Jinsuk Kang, Team leader of ENVELOPS


The last speaker was from a Korean startup which is on the path to becoming a unicorn. Jinsuk Kang, Team leader of ENVELOPS, focused on the topic of agrivoltaics. She noted the problem of the decrease in arable land due to excessive development, urbanization, desertification, and climate change. The solution to this could be agrivoltaics. It’s a concept of using the land both for farming and energy generation. She shared examples from France, Germany, and the US proving that crop yields were better under the shades of photovoltaic panels. It increases land use efficiency, provides canopy effect from heat, reduces water evaporation, and enables smart farms. 

Ms. Kang continued on by introducing her company ENVELOPS. It’s a startup focusing on the provision of stable energy sources to small island countries (SIDs). The company mainly engages in renewable energy project development and project finance. Core partners are KOICA, GCF, and national development banks. It’s currently carrying out projects in Indonesia and Fiji and hopes to expand their operations in ASEAN countries such as Vietnam, 

Following her speech, Professor Lee mentioned that businesses should reconsider the environmental responsibilities not as compliance but as new opportunities. Moreover, startups could be better fit to address the fast-changing green business. That being said, the session moved on to discussions.


◎ Discussions


- Ji-hwan Lee) The Green startup 2000 plan of the Korean government seems to entail active cooperation with the private sector. Would you share some previous examples Professor Kim?

- Seong-hoon Kim) The plan was recently announced and it is true that the details are not laid out yet. However, the Korean government seeks to mobilize KRW 300 billion worth of venture fund for the project. Moreover, they’re planning to nurture 100 relevant companies as part of the K-Green New Deal. While these companies include quite a lot of large ones, I believe it’ll open up more opportunities on financing and scaling up for startups as well.


- Ji-hwan Lee) Now I’d like to direct a question to Mr. Kim. Which area shows the most potential among green businesses? Do you think ESG would be one of them?

- Jeong Tae Kim) When we’re assessing the potential, we try not to focus only on the investor perspective. One of the important benchmarks we use when evaluating a firm is the opinions from the industry. I believe this goes for other investors, such as strategic and financial investors, as well when investing in startups. 

Environmental aspect from ESG has been the focus of investment for decades. Thus, ample development in quantitative and qualitative indicators. However, the social aspect still needs progress. Meanwhile, we have to take in mind that many of the startups are one-man companies. It’s not easy for them to provide sophisticated financial statements. We need to focus on different aspects such as business prospect and industry opinions when assessing them.

- Ji-hwan Lee) Then, regarding the global potential and the ecosystem of local startups, do they have competitiveness?

- Jeong Tae Kim) The firms we’ve invested in generally had overseas expansion plans, which was one of the reasons that made the investment more attractive. The case of Injin falls under this category as well. I’d like to hear more from Professor Kim on this question.

- Seong-hoon Kim) In 2018, Korea’s market share in the global ESS market was 45% but now we’ve lost the momentum. Converging ESS with ICT could address many problems regarding renewable energies and utilizing the smart grid. Economic feasibility is still a barrier in realization of the technology but I believe the price will drop by 40% in 3 years-time. When that happens, I think the reference and past experience will determine global competitiveness. Many Korean companies already have these experiences which means that they’ll have no problem competing in the global market.


- Ji-hwan Lee) From the video of Director Cruz public private partnership was mentioned. Having worked with governmental organizations, how was your experience with KOICA, Ms. Kang? Do you have any advice for other startups?

- Jinsuk Kang) Fiji Development Bank (FDB) and KOICA has established a partnership prior to our participation and we’ve joined from the feasibility studies. KOICA and GCF was in charge of the financing and we were there for technological support. I believe we’ve made a meaningful contribution to the project and it was a learning experience for us as well on how to utilize our resources under an unfamiliar context. 

- Ji-hwan Lee) Have you attracted any new investments for this project?

- Jinsuk Kang) Yes, we’re still going through that phase and we’re hoping to launch the project next year.

 

- Ji-hwan Lee) This brings me back to the impact investment. Does capital gain and social impact have similar importance to the investors?

- Jeong Tae Kim) I don’t think the credit reviewers of VC have deep understanding on climate change or environmental impacts. We found out that their response and ours were very different when we introduced companies such as Root energy or Injin. One way for these startups to get better credit rating would be through government reference. However, in the case of a policy shift or a regime change it could also induce risks because of the uncertainties. 

I don’t believe financial investors would invest in these companies for short-term gains. Nevertheless, due to operational or strategic needs, some strategic investors might be interested in the long-term profits. On a final note I believe VC investors should be more educated on climate change and environmental issues. 

- Ji-hwan Lee) Thanks for the answer. If there are no additional questions, I’d like to wrap up the session. Thank you all for the talks and time management.


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