ESG platforms face market shake-up as free reporting tools expand in Asia

In 2022, just before the implosion of the now-bankrupt crypto exchange FTX, the trade show’s main exhibition hall was crawling with cryptocurrency firms, with Crypto.com being one of event’s headline sponsors. Now disgraced FTX founder Sam Bankman-Fried – then the poster child for crypto – was also listed in the event brochure as one of the community’s key members.

In 2023, signs of the cryptomania could scarcely be found. But activity picked up in one of the six exhibition halls, known as the “ESG Zone”, which organisers began dedicating exclusively to ESG-related solutions the year before. Recognised players like ESG ratings giants S&P Global and Morningstar, the Singapore-listed conglomerate Sembcorp’s carbon management platform GoNetZero, as well as greentech startups, including Arabesque, Evercomm and Zuno Carbon, fronted two full rows of booths.

It marked the mainstreaming of sustainability in the fintech ecosystem, which culminated in the launch of a national digital disclosure utility known as Gprnt (pronounced “Greenprint”) to much fanfare (and the drinking of upcycled beer made from surplus bread).

However, in 2024, activity at the ESG Zone was noticeably muted compared to the year before. A rough count by Eco-Business found that only six ESG firms had set up shop, down from 26 in the previous year.

“I’m not going to gaslight you and tell you it’s the same size as last year,” Lionel Wong, Gprnt’s executive director and head of the Monetary Authority of Singapore (MAS)’s Green FinTech Office told Eco-Business, when asked about the smaller ESG Zone. “There’s always a repositioning of people depending on what they think the hot topic is that year. In 2024, you’ll notice that the technology stage is a lot more grandiose, because everybody’s all in on technology.” 

Enthusiasm shifted squarely to artificial intelligence (AI) in 2024, with financial institutions, big tech firms and regulators rushing to scale up capabilities in the power-hungry technology, sparked off by US-based OpenAI’s viral generative AI chatbot ChatGPT.

Former ESG Zone exhibitors that Eco-Business spoke to cited a lack of return on investment from the previous year as the key reason they did not set up a booth at SFF in 2024. Climate tech startup Handprint said that Gprnt had given it a booth the year before. “This year we didn’t get one and we didn’t want to pay for one either,” said its co-founder Simon Schillebeeckx, in response to an Eco-Business query.

Singapore government-backed ESGpedia, previously known as STACS, was the only returning vendor, alongside Gprnt. Japanese platforms Asuene and Terrast, which were part of a national pavilion the year before, had standalone booths last year.

Benjamin Soh, co-founder and managing director of ESGpedia, said the firm paid S$18,000 (US$13,100) for two booths worth of space and an additional S$2,000 (US$1,500) to dress it up.

In the past few iterations of SFF, the ESG Zone space was heavily subsidised in order to build up the community, said Wong. However, he noted that more resources went into supporting the transition of the MAS’ non-profit entity Elevandi – set up in 2021 to advance the fintech sector in Singapore and globally – to a new organisation called Global Finance & Technology Network (GFTN) in 2024.

GFTN was established last October and will be headed by the central bank’s current chief fintech officer Sopnendu Mohanty, overlooked by a board chaired by ex-MAS managing director Ravi Menon.

The quieter ESG Zone is, however, also a reflection of the wider global landscape, said Wong. 

Recounting an exchange he had with the chief executive of the Brussels-based reporting software Greenomy in early 2024, Wong was told that many green tech firms in Europe were closing shop, contrary to his expectation that they would be having a “whale of a time” given the rising demand for ESG data integration, platforms and automation.

“A lot of the reporting solutions are now battening down the hatches and trying to ride out the wave, especially against the broader context of the politicisation of ESG,” Wong said. Meanwhile, those that had been “freewheeling” and expanding aggressively in multiple regions have found their businesses winding up, he added.

“It’s more endemic of a broader re-rationalising of business models, especially amidst a climate where there may not be as many adopters,” Wong said. “Realistically, there will be consolidation and companies need to demonstrate how they can meet market needs in order to survive.”

This is key, especially after Gprnt launched its automated and gen AI-powered disclosure tool for businesses to measure their Scope 1 and 2 emissions for free, in response to mounting compliance requirements small- and medium-sized enterprises – which lack the resources of larger multinationals – will have to meet in coming years.

“If today I cannot justify why I’m asking for a dollar from a user when I’m doing exactly the same thing as a free utility, then I should really ask serious questions about what I’m trying to achieve,” said Wong.

Survival of the fittest

The growing demand for these solutions has resulted in an increasingly crowded market, comprising pure-play ESG analytics platforms, large software companies that have acquired and bolted-on ESG capabilities and tech giants.

Sales for ESG software solutions are expected to see a huge jump in the next few years – with an estimated annualised average growth rate of between 19 to 30 per cent – as mandatory reporting rules across Asia take effect.

But not all the new players will be able to last beyond the initial innovation phase to be adopted by a financial institution or large corporation, said Wong.

Last August, Singapore-based ESG platform Turnkey – which counted big corporations like transport giant ComfortDelGro, state-owned utilities firm SP Group and Malaysia-headquartered independent credit ratings provider RAM Sustainability among its clients – went into administration a decade after being founded, according to those familiar with the matter.

In response to a request for comment, Eco-Business received an email bounce back from Todd Rosin, Turnkey’s former global business development officer. Rosin did not respond via LinkedIn. Checks by Eco-Business also found that the website domain is no longer live, despite Singapore’s business registry still listing it as a “live company”.

Eco-Business also learnt that carbon accounting platform Persefoni, which had a booth at SFF in 2023, had been dropped as global software-as-a-service company Workiva’s partner for carbon data sharing, after it acquired an Irish startup Sustain.Life to take its ESG data management services entirely in-house. 

Of the four firms in the space that Eco-Business spoke to, only one – Paris-headquartered data analytics company Ekimetrics, which co-built Gprnt’s AI solutions – is profitable, according to employees. But it is also the most established of the lot, having commenced operations in 2006 developing AI products, before launching its sustainability tools and expanding its global presence in London, New York, Hong Kong and Shanghai.

The other three firms – Asuene, ESGpedia and Terrast – were all founded in 2019, and are in various stages of building out their customer base beyond where they currently operate.

“We are not profitable in the sense that we are still in a startup phase and expanding,” said Shu Setogawa, Asuene’s director of sales and business development. “So we’re at the stage where we are strategically investing for future growth. But we have the confidence level in terms of financial stability.”

The carbon accounting platform raised US$64 million in a funding round last August, which Setogawa said would be sufficient to sustain its operations for the next 70 years.

ESGpedia’s Soh told Eco-Business that while it is not yet profitable, its revenues are “trending on the positive side” and its number of paid customers multiplied in 2024, compared to the year before.

“A lot of it has to do with the business environment, in the sense that a lot of procurements now need to consider sustainability, and listed companies have to produce sustainability reports… I think as an industry, everybody is seeing increasing demand,” said Soh.

ESGpedia, which powers Gprnt’s data registry, raised US$3.6 million in its seed funding round in early 2021.

Meanwhile, ESG data and analytics firm Terrast, which raised an undisclosed amount of seed funding from Japanese venture capital firm JAFCO in 2022, is currently welcoming strategic third-party investments to scale the business, said its chief operating officer Kotaro Takahashi.

“The market has already passed the awareness stage. Right now, it is at the implementation stage. This means that there are a lot of corporations that have already selected or are starting to use some of the solutions,” he said. “So there are fewer newcomers and the market is no longer at the early stage, because firms know the use cases.”

Keeping AI hype in check

The past year has seen a surge in firms boasting of their AI-enabled sustainability solutions. But less talked about is whether these tools are, on a net basis, solving the climate crisis after accounting for their more intensive power and water usage, compared to existing technologies.

Chinese tech giant Alibaba advertising its AI solutions for ESG reporting at Singapore FinTech Festival 2024. Image: Eco-Business/ Gabrielle See

Ekimetrics, for instance, has developed an AI chatbot that responds to queries on climate change and biodiversity loss by referencing relevant reports from United Nations scientific bodies. But each query on the platform generates about two to four times more emissions than a typical Google search, according to the developer’s estimates.

Industry players also say it is premature to introduce some of the emerging gen AI technologies into their products.

“Firstly, gen AI needs to have a stable enough data set, which we believe doesn’t exist yet in sustainability. Secondly, certain things, like carbon emissions calculation, are just mathematical formulas. So traditional AI in the form of machine learning to match a company’s products against emissions factors does help to compile the data faster,” said ESGpedia’s Soh.

“Sometimes the simplest technologies do work… We are not running any funky gen AI use cases here and we are also integrating with other systems where the data is really available, so we don’t need to crunch the numbers again. So a lot of it is actually reducing computational power or the human effort required for the outcome,” he added.

“A common use of the AI in this industry right now will be to generate recommendations for decarbonisation. Our opinion is that it’s probably not sophisticated enough to be a feasible solution, because the algorithm can be made to pick up where the emissions are high and then give a general recommendation like: use renewable energy,” said Asuene’s Setogawa.

“Often when it comes to decarbonisation, someone with expertise and knowledge of what solutions exist in a market will have to drive that. I’m not sure if AI is going to replace that.”

Using AI to speed up the calculation of carbon emissions by data matching could also run into accuracy issues with a large data set, warned Setogawa. “You might run into the danger that your line items are completely referencing the wrong emission factors.”

Gprnt is also being “quite conscientious” in applying gen AI, which Wong believes could be game-changing in helping small businesses articulate their qualitative metrics, like transition risks, based on data about where their assets are located and the risk profiles of those particular countries.

In due time, Wong is confident that computing will become more sustainable through the greening of data centres. “I think we will get there, but I don’t know how long it will take.”