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      Asia Pacific stands at a pivotal crossroads in the global push for sustainability. Home to over 60% of the world’s population and a growing share of economic power, Asia Pacific plays a crucial role in this global movement. The region contributes more than 50% of global greenhouse gas (GHG) emissions due to its rapid industrialization, urbanization, and continued dependence on fossil fuels.1 At the same time, it’s also one of the world’s most climate-vulnerable nations, with its communities being six times more likely to experience extreme weather events than those elsewhere.2

      Governments and communities across Asia Pacific are responding by turning to GreenTech solutions – technologies that address climate risk mitigation, agriculture, water management, waste management and circularity. 

      These innovations span renewable energy, flood mitigation, crop monitoring, and alternative materials.

      As adoption grows, so too should the opportunity to accelerate innovation, creating a positive flywheel toward a cleaner, more resilient future for the region.

      The key drivers of GreenTech funding

      Despite macroeconomic headwinds, GreenTech funding in Asia Pacific has remained resilient. Many countries and territories in the region have seen funding flow into GreenTech in recent years, with venture capital (VC), private equity (PE), philanthropic organizations and impact investors, continuing to back climate-focused innovation.

      Insights from stakeholder interviews conducted for our report reveal four primary drivers fueling this momentum:

      • National-level targets for sustainability goals

        for sustainability goals

      • Industrial policy and government incentives for R&D and GreenTech adoption

        for R&D and GreenTech adoption

      • ESG integration into corporate activities and processes

        into corporate activities and processes

      • Green finance mobilisation, including blended finance mechanisms,

        including blended finance mechanisms

      The funding paradox – Capital exists, progress lags

      Despite growing awareness and enthusiasm, GreenTech in Asia Pacific faces a funding paradox. While Asia’s climate tech funding fell 44% between 2020 and 2024, private capital commitments to green investments have increased.

      However, investments are concentrated in clean energy, leaving critical sectors like agriculture, water and waste underfunded. Moreover, 65% of deals in Asia are funneled into early-stage investments. China stands for its systematic, government-led approach and strong academia-industry collaboration, but its success has yet to translate into broader regional scaling. 

      Beyond funding, several systemic challenges hinder the growth of Asia Pacific’s GreenTech ecosystems:

      • Fragmented capital flows and high financing costs
      • Regulatory, policy and geopolitical shifts across markets
      • Telent gaps — especially in business and green talent
      • Investor preferences for low-risk investments with clear, short-term financial ROIs
      • Market & infrastructure readiness for adoption and scale of GreenTech
      • Nationally focused ecosystems that limit cross-border collaboration

      For startups, these challenges are even more acute. Early-stage funding is often available, but the “missing middle” for scale-up remains a major hurdle. Long R&D cycles, hardware-heavy solutions, and gaps in business acumen further slow progress. As a result, only a small fraction of GreenTech startups reach later funding stages or achieve meaningful scale.

      Pathways to scaling GreenTech across Asia Pacific

      To unlock the full potential of GreenTech in Asia Pacific, coordinated action is needed across five key areas:

      Aligning GreenTech innovation directly with clearly defined national initiatives and targets enables startups to be more investable and scalable, unlocking stronger commercialization pathways. GreenTech startups should seek to move beyond passion-driven innovation to building tech solutions that solve real market demands as the market responds to these national initiatives. Other industry and government-led initiatives such as innovation challenges and regulatory sandboxes can help to further strengthen the alignment with these national targets and hence enable product-market-fit.

      GreenTech startups should have more than technical innovation — they require strong business foundations as they scale. This includes financial management, operations and process optimization, talent acquisition and retention, sales & business development and others. By embedding entrepreneurial skills into education, industry partnerships and government-led startup support programs, GreenTech startups can leverage artificial intelligence (AI) to build more bankable, commercially viable and globally competitive solutions that are built for scale through rapid prototyping enhanced business projections

      Existing financial models used by investors should evolve to prioritize long-term economic and environmental value over short-term returns. By integrating climate impact into financial decision-making, Asia Pacific’s GreenTech ecosystems can become more inclusive and resilient. Introducing blended finance mechanisms and more patient capital, GreenTech startups would have greater access to funds, which should enable them to better navigate the various growth phases of their journeys – from seed to maturity, where the majority of GreenTech startups struggle and potentially fail.

      Governments can consider mobilizing private capital to bridge the “missing middle” by structuring blended finance mechanisms that de-risk mid-stage GreenTech innovations, enabling private capital to engage more confidently. Corporates can establish dedicated climate innovation funds or allocate dedicated capital for investing in GreenTech startups as an alternative to traditional in-house R&D. Based our findings from our report, AI-powered GreenTech solutions are more likely to attract investments due to growing investor interests in AI-based technology solutions.

      Establishing central information hubs to orchestrate and strengthen engagement within innovation ecosystems can reduce network fragmentation and enable knowledge flow across the value chain — from industry leaders to startups and universities, including regulators and policymakers. By facilitating direct collaboration, co-development of technologies, and smoother pathways for technology transfer through shared R&D facilities and distribution partnerships, the hub can unlock commercial potential more efficiently. 

      Governments can also look at developing strategic international partnerships that can enable startups to tap into a cross-border network and provide access to the knowledge and connections they need to realize the full potential of their innovations. To revitalize Asia Pacific’s innovation landscape, long-term policy frameworks should be embedded, alongside fostering deeper industry-academia collaboration, and enabling startups to act as agile ecosystem builders. 

      At the ecosystem level, AI can help empower investors and corporates with data-driven insights to identify high-potential ventures, de-risk investments, and streamline regulatory compliance. When embedded strategically, AI can help accelerate the region’s transition toward a low-carbon, resilient economy and also strengthen competitiveness, attract capital, and create long-term value for businesses and society alike.

      Pacific should be seeking to harmonize its policy frameworks and national programs to foster innovation, while also encouraging public and private sector collaboration. Establishing long-term, cross-administration policy frameworks can sustain interest in and consistent support for GreenTech innovation, thus strengthening investor confidence and building greater innovation momentum. By creating independent innovation councils/agencies to oversee continuity, key funding programs or policies for GreenTech R&D should be able to transcend national politics. These policies should help shape corporate policies to enable GreenTech demand to extend across the entire value chain in areas such as supply chain management, procurement and operations, among others.

      The time to act is now

      Asia Pacific’s GreenTech ecosystems are at a critical inflection point. Climate risks are escalating, competition is intensifying and gaps in funding, talent, and policy remain. The window for meaningful impact is narrowing – but not closed.

      Asia Pacific can position itself as a global leader in sustainable growth if governments, industry leaders, investors and innovators come together to break down silos, bridge financing gaps and build robust, collaborative ecosystems. The region’s climate resilience and economic future can be shaped by the bold, coordinated steps we choose to take today.

      About the report

      Given the fact that funding does exist — and is growing in many regions — what is stymying Asia Pacific’s progress in scaling GreenTech innovation? KPMG’s Potential to Progress report, supported by Google, explores the challenges facing the sector from a whole-ecosystem perspective to uncover what’s limiting the progress of GreenTech startups in the region.

      Drawing on secondary research and interviews with stakeholders across ASEAN, Australia, New Zealand, Japan, Greater China, and India, the report examines the region’s ecosystem-wide challenges in accelerating GreenTech innovation – from regulatory challenges to talent gaps and to immature ecosystems – and offers actionable insights to accelerate progress.

      Our people

      Sharad Somani
      Sharad Somani

      Head of Infrastructure, KPMG Asia Pacific

      KPMG in Singapore