Backing the next big disruptor


How to invest in emerging technologies and position your portfolio for the future.


We live in an era of disruption. From movies and methods of payment to marketing and plant-based meat, emerging technologies have upended old systems and transformed nearly every industry, giving rise to a new generation of disruptive businesses.

Cities such as Hong Kong, Singapore, New York and London are also looking to the future and investing heavily in innovation and technology, says Peter Mok, Head of Greater Bay Area at Hong Kong Science and Technology Parks Corporation (HKSTP). The Hong Kong government’s statutory body incubates more than 1,000 technology companies from around the world and helps them expand globally.

“The new generation’s demands, needs and values are different from those of the older generation.. Innovation and technology are imperative in satisfying these needs,” says Mok, citing an increasing global focus on sustainability and digitalization of solutions. “Using technology to resolve social issues will become the trend in the future.”

Among the biggest areas of opportunity he identifies is 5G, as high-speed internet access is the foundation on which new trends like Smart Cities will run. From 5G springs more areas of innovation, such as the Internet of Things (IoT), artificial intelligence (AI) and machine-to-machine communication.

These will allow businesses to launch cutting-edge solutions such as remote surgery, immersive entertainment and edge computing, which involves processing data close to its source, leading to more efficient networks.

The many faces of disruptive tech

What do disruptive businesses look like in real life? One example is HKSTP’s nurtured tech venture — Lalamove, a logistics company operating in 30 countries and 250 cities worldwide. It uses algorithms to create optimal delivery routes for vehicles, reducing fuel use.

The company’s popularity has soared in tandem with online shopping, says Mok, adding that its model has disrupted the traditional approach in Hong Kong, where operators use telephones and radios to assign delivery jobs to a fleet of drivers.

Another disruptor is archiREEF, a startup that combines marine biology knowledge with 3D printing technologies, creating an eco-engineering solution which uses “tiles” made of natural material to restore coral reefs, aligning with Hong Kong’s commitment to become carbon neutral by 2050 .

Then there is SenseTime, China’s biggest AI company. Founded by a team of professors from the Chinese University of Hong Kong, it commercializes the university’s academic research in AI into market services, including facial recognition and crowd management systems.

The latter could help communities maintain order at massive events, says Mok, citing a stampede at a New Year’s celebration in Shanghai’s Chen Yi Square that resulted in 36 deaths.

An inclusive approach

Even as disruptive technologies gain steam, an inclusive approach is needed to help them flourish. Public-private partnerships are critical when it comes to effectively driving progress for industries like 5G, AI and big data are still heavily regulated and they rely on companies from the private sector to create solutions tailored to market needs.

Thus, ecosystems in which a variety of stakeholders – such as governments, non-governmental organizations, corporates, startups and universities – co-create solutions are one way to incubate disruptors, says Mok.

HKSTP, for example, has collaborated with more than 250  public and private partners to drive technology adoption, translational research and commercialization. With plans to expand beyond Hong Kong into Greater Bay Area (GBA) cities like Shenzhen, HKSTP provides disruptors with access to the resources they need to scale: big markets, fresh talent and large manufacturing capabilities.

One group that has benefitted from this arrangement is universities working on deep-tech research. “We see a lot of very good technologies from their knowledge transfer offices and what they are lacking is early-stage investment,” says Mok.

Some investors may think emerging technologies are too advanced to comprehend. But this is not always the case, says Jasmine Duan, investment strategist at RBC Wealth Management in Asia. The ultimate goal of many disruptive technologies, she says, is to improve convenience and quality of life.

“We can pay attention to the companies that are impacting our daily lives, and the applications of the technologies that we are already using,” Duan says. “That will be a much easier way to get to know all these companies, and to start thinking about how we can include them to our portfolios.”

Investing in next-gen disruptors

Amid the dizzying array of disruptive businesses in Asia and around the world, how should those who are keen on capturing potential gains in new and emerging technologies position their portfolios for the future?

Duan suggests thinking about these two things when considering an investment strategy:

1. Pin down areas of interest

The ultimate goal of many disruptive technologies is to improve convenience and quality of life. As such, they often fall under the umbrella of sustainable technology (SusTech), which uses technology to help mitigate sustainability challenges.

Identifying core areas of interest within SusTech will assist in narrowing the field of firms, says Duan. The five SusTech areas RBC Wealth Management has identified are:

  • GreenTech
  • FoodTech/AgriTech
  • FinTech
  • HealthTech
  • Smart Cities

2. Decide on a level of responsible investing

Once an area of focus has been identified, investors can consider which of the four levels of environmental, social and governance (ESG) investing best resonate with their values.

ESG integration ESG integration ESG factors are incorporated into the investment decision-making process to identify and assess potential risks and opportunities and help improve long-term, risk-adjusted returns.
ESG screening and exclusion Applying positive or negative screens to include or exclude assets from the investment universe.
Thematic ESG investing Thematic ESG investing Investing in assets involved in a particular ESG-related theme, such as HealthTech, or seeking to address a specific social or environmental issue.
Impact investing Investing in assets that intend to generate a measurable positive social or environmental impact.

Some organizations, like HKSTP, look beyond return on investment. “We promote technologies for the benefit of human beings. It’s about human good,” says Mok. “These types of technologies are very important for their impact on society.”

Duan adds that today, investors “don’t want to just follow the way that the market has chosen a particular winner. They want to gather information, understand what is aligned with their values and purpose, and what they feel is right for the future.”

While many investors believe in ESG investing, some are skeptical about company-submitted ESG data, or believe investing in these types of firms offers smaller returns.

In such cases, investors can reach out to their advisors, who may use institutional networks to obtain hard-to-get ESG data and apply appropriate financial, risk and performance frameworks when analyzing which firms to back.

“Often, ordinary investors don’t have the time or knowledge to judge,” says Duan. “It is important to talk to professionals who can help you to better understand the company and [related] investment opportunities.”

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