Is the ESG boom over?

Bryan Chuang, Taipei; Vyra Wu, DIGITIMES Asia 0


A recent study by KPMG indicates that the once-burgeoning interest in Environmental, Social, and Governance (ESG) concepts is slowly diminishing, with investors and businesses shifting their focus to electric vehicles and batteries. Nevertheless, Taiwan's Financial Supervisory Commission (FSC) emphasizes that ESG remains a crucial trend; besides the electronics sector, the financial industry must also incorporate ESG principles.

FSC underscores Taiwan's potential to overcome various challenges due to its pool of talent, technological capabilities, and financial resources. According to the International Monetary Fund (IMF), the global GDP growth rate is projected to be 2.9% in 2024, whereas Taiwan's economy could achieve a 3% growth rate. This exemplifies the resilience of Taiwanese companies in the face of challenges such as global inflation, the US-China technology dispute, Russia's invasion of Ukraine, and the Israel-Hamas war.

Taiwan's small and medium-sized enterprises employ around 9.2 million people, and their non-performing loans ratio stood at just 0.24% as of August 2023. The belief is that these enterprises will experience steady growth, with the financial sector serving as a critical pillar of support, especially for startups. To foster the development of innovative businesses, FSC has overseen a successful listing of 34 innovative enterprises on the Taiwan Stock Exchange and Taipei Exchange.

As per KPMG's research findings, the broad concept of ESG has steadily lost favor among investors and businesses. Instead, electric vehicles and battery technologies have taken center stage. Three China-based EV companies were among the largest deals this quarter, including a US$1 billion raise by Rox Motor, a US$969 million raise by Neta Auto, and a US$600 million raise by Farizon.

Moreover, there has been substantial investment in battery technology, with companies like Verkorto, a French battery manufacturer (raising US$2.27 billion), Redwood, a US-based battery recycling company (raising US$997 million), and Ascend Elements (raising US$460 million).

Furthermore, global investment in artificial intelligence (AI) continues to surge. Many AI companies have secured significant funding, including US-based startups such as cloud data platform Databricks (raising US$5 billion), Neuralink (raising US$2.8 billion), Telexistence in Japan (raising US$170 million), and Aleph Alpha in Germany (raising US$225 million).

This year has witnessed a remarkable surge in the valuation of AI firms, prompting a need for caution among investors who are pouring billions into this sector. While the frenzy around AI is undeniable, could it, like in the case of cryptocurrency startups in the past, lead to inflated expectations and eventual disappointments for those who invest heavily in it?