"Carbon Neutral New Technology 'Valley of Death'... Need for Mediators Among Government, Companies, and Pension Funds" [Net Zero is the Future①]

In So-Young, Lead Researcher at Stanford University Sustainable Finance Initiative

"Technology, Policy, and Finance Must Collaborate for Commercialization of Startup New Technologies"
Evaluation Considering Added Value of Specific Industries like Steel and Automobile is Desirable

Lecture at 'Net Zero' Asia Economic Forum on 27th

[Editor's Note] As the social responsibility of companies and investors for sustainable development becomes increasingly important, it has been two years since ESG (Environmental, Social, and Governance) emerged as a key management issue. ESG is now a survival challenge and an essential element of corporate management. Especially, countries around the world are accelerating the transition to a carbon-neutral society by 2050, aiming to keep the global temperature rise below 1.5 degrees Celsius. In Korea, carbon neutrality has become a national task directly linked to the survival of future generations.

It is now time for a grand discourse that can further spread ESG management through the practice of ESG management such as carbon neutrality and energy transition, transparent information disclosure, investment attraction and benefit provision based on that, and evaluation. Asia Economy is conducting a year-round project to examine the current status and issues of ESG management in Korea through domestic and international experts and to seek solutions to contribute to the long-term development of companies and the economy.

In So-young, Senior Researcher at the Stanford University Sustainable Finance Initiative (SFI) and Research Director at the Stanford Korea Center, is being interviewed by Asia Economy on the 20th. Photo by Mun Ho-nam munonam@

"Even if startups develop new technologies to realize carbon neutrality, the 'Valley of Death' problem is severe in moving from pilot production to commercialization. There is an urgent need for a reliable 'mediator' among stakeholders such as the government, technology companies, pension funds, and venture capital (VC)."

Sooyoung In, Senior Researcher at the Sustainable Finance Initiative (SFI) and Research Director at the Stanford Korea Center, who has specialized in sustainable finance research at Stanford University, pointed out the financial challenges of carbon neutrality in an interview with Asia Economy on the 22nd.

She explained that as achieving carbon neutrality has become an unavoidable challenge for the survival and prosperity of future generations, technology, finance, and policy must cooperate to create a market.

She cited energy startups actively emerging in the U.S. as an example. These startups heavily rely on traditional VC investments, but it takes a long time to commercialize new technologies. However, there is a significant gap with the short-term profit-seeking nature of VCs, so even with high-level technology, many startups struggle to secure funding and face management difficulties. To improve this issue, In emphasized that the government or certified social enterprises should act as mediators coordinating among stakeholders and participants.

In particular, she stressed the role of VCs specialized in early-stage technology investment, companies with know-how in related fields, and institutional investors focused on long-term investment, rather than the government directly leading technological innovation using public funds. This approach would enable various stakeholders to provide necessary investments and risk management at the right place and time. She emphasized the need for a trustworthy mediation institution.

However, in Korea's case, she said it is realistically necessary for the government to take on this role. The government should become a mediator by establishing transparent disclosure systems and resource mobilization platforms tailored to corporate circumstances.

In said, "Looking at the U.S. example, the 'Valley of Death' for energy startups follows a pattern from research and development (R&D) to pilot construction and commercialization," adding, "It is essential to create a reliable 'information-sharing system' trusted by stakeholders so that large corporations, like pharmaceutical companies, actively invest in startups whose new drug technology is nearing completion."

Currently, as ESG management is being activated worldwide, institutional discussions on establishing standards or norms are actively underway. She advised that for carbon emissions, certain industries such as steel and automobiles inevitably have higher absolute carbon emissions than others, so a relative evaluation method considering industry characteristics and value creation is desirable.

She also suggested considering new indicators that take industry characteristics into account. She cited the U.S.-based ESG exchange-traded fund (ETF) manager 'Ito Capital,' which developed its own 'Scope 4' that considers 'carbon negative emissions' occurring during the product consumption phase, in addition to the existing international greenhouse gas emission standard system 'GHG Protocol' Scopes 1, 2, and 3, as a reference case.

When companies consume eco-friendly energy and raw materials, the avoided emissions or emission reductions are considered, resulting in a lower Scope 4 score and relatively higher ESG scores.

On the other hand, she proposed that establishing standards to detect 'greenwashing,' such as China's green bonds that allow investment in 'white coal' (clean coal), is also a method. She explained the need to monitor research that identifies patterns of 'greenwashing' emerging in academia and verifies the reliability of ESG indicators and the relationships among related indicators. She also mentioned the necessity of a system to manage 'silent green' companies that perform well in ESG management but deliberately remain silent to avoid public scrutiny.

In said, "Ultimately, providing market incentives for companies to participate in carbon emission reduction depends on establishing proper standards," and added, "It is crucial to develop an evaluation system that can measure the degree of corporate renewable energy transition and carbon reduction performance and provide financial incentives, which is an important factor in solving funding issues in the renewable energy sector."

Meanwhile, In will participate as a speaker at the 10th Asia Future Business Forum co-hosted by Asia Economy and Stanford University on the 27th under the theme 'Net Zero is the Future,' where she will share insights on global net-zero transition and sustainable finance.