Learn more about key emerging technologies and what to consider when including them in your investments.
We live in an era of disruption. From the introduction of ChatGPT to 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.
What do disruptive businesses look like in real life? One example is HKSTP’s nurtured tech venture Lalamove, a logistics company operating in 11 markets across Asia and Latin America. 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, one of China’s biggest AI companies. 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.
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, which are facing regulatory scrutiny and 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 300 public and private partners to drive technology adoption, translational research and commercialization. Expanding 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, senior 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.”
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:
The ultimate goal of many disruptive technologies is to improve convenience and quality of life. And 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:
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.
Some organizations, like HKSTP, look beyond return on investment. “We promote technologies for the benefit of human beings, for their impact on society,” says Mok.
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 responsible investing or using ESG data in their investment process, 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.”
The material herein is for informational purposes only and is not directed at, nor intended for distribution to or use by, any person or entity in any country where such distribution or use would be contrary to law or regulation or which would subject Royal Bank of Canada or its subsidiaries or constituent business units (including RBC Wealth Management) to any licensing or registration requirement within such country.
This is not intended to be either a specific offer by any Royal Bank of Canada entity to sell or provide, or a specific invitation to apply for, any particular financial account, product or service. Royal Bank of Canada does not offer accounts, products or services in jurisdictions where it is not permitted to do so, and therefore the RBC Wealth Management business is not available in all countries or markets.
The information contained herein is general in nature and is not intended, and should not be construed, as professional advice or opinion provided to the user, nor as a recommendation of any particular approach. Nothing in this material constitutes legal, accounting or tax advice and you are advised to seek independent legal, tax and accounting advice prior to acting upon anything contained in this material. Interest rates, market conditions, tax and legal rules and other important factors which will be pertinent to your circumstances are subject to change. This material does not purport to be a complete statement of the approaches or steps that may be appropriate for the user, does not take into account the user’s specific investment objectives or risk tolerance and is not intended to be an invitation to effect a securities transaction or to otherwise participate in any investment service.
To the full extent permitted by law neither RBC Wealth Management nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or the information contained herein. No matter contained in this material may be reproduced or copied by any means without the prior consent of RBC Wealth Management. RBC Wealth Management is the global brand name to describe the wealth management business of the Royal Bank of Canada and its affiliates and branches, including, RBC Investment Services (Asia) Limited, Royal Bank of Canada, Hong Kong Branch, and the Royal Bank of Canada, Singapore Branch. Additional information available upon request.
Royal Bank of Canada is duly established under the Bank Act (Canada), which provides limited liability for shareholders.
® Registered trademark of Royal Bank of Canada. Used under license. RBC Wealth Management is a registered trademark of Royal Bank of Canada. Used under license. Copyright © Royal Bank of Canada 2024. All rights reserved.
We want to talk about your financial future.