Green Industry Development andInvestment Strategy
Ｌih-Chyi Wen
Research Fellow/Director
August, 2016

簡報大綱Outline1. Background: what

2. Green Industry Development Strategy
3. Green Investment

International policy signal forgreen growth is very clear

UNFCCC: COP 21 for Paris agreement and theimplementation of INDCs
WTO: negotiations on EGS
APEC: Tariffs of 54 green EGS will be cut in 20153

“We want the low-carbon economy that
continues to provide good jobs and great
opportunities for all Canadians.”••$75 million to Canadian towns and cities
to “respond to pressing climate
challenges” and50 million investment in improvince
climate resilience in design guidelines
and infrastructure codes.

Globe 2016 Leadership Summit
加拿大新任總理 Justin Trudeau

4Fossil Fuel vs. Renewable Energy

Data source: Bloomberg New Energy Finance(2016)

5

Global Trend of Renewable Energy

Data source : Bloomberg New Energy Finance(2016)

6

Global Trend of Energy Storage

Data source : Bloomberg New Energy Finance(2016)7

Global Trend of Smart Grid

Data source: Bloomberg New Energy Finance (2016)8

1 Methodology

A Case Study in FinlandObjective
Market-Driven Economic Development
To develop an efficient means for selecting
companies and projects for investment in
new green industries that can drive job
creation and economic growth…

…at market returns, but with maximum
leverage opportunity for public funds.
10Roadmap:‘Smart Industrial Farming’ of the Economy
1. Economic developers optimize
economic variables:
•
•
•
•
•

Macroeconomic trends
Core skills and competencies
Investment policies (loans, subsidies,
trade)
Workforce development
Attract private and institutional investors(pension funds, investment banks, FDI)

1.
2.
3.
4.

2. Companies respond to &influence industry and market
variables:••••

Macroeconomic trends
Changing business models
Investor requirements
Supply chain shifts

Collect data from companies
Process them in the cloudContextualize ecosystems
Optimize growth and profits

KeyStone Compact Group:
11

Matrix-crunching software platforms for economic
investment management

Why Industry Ecosystems?
They are the Basis of Industrial Renewal
Shift from linear, rigid and cost-driven value chain models of economic
development, towards adaptive, value capturing, and investable businessecosystem models

12

Roadmap to understand and invest in industry change for green growth

【範例】

2

ModulePart I. Mapping Emerging Industry
Ecosystems

14

Financial Network Mapping:
How Does it Work?
1. Mine Bloomberg database to obtain raw supply-chain dataCollect company names, industry codes, and corporate financial data

Mine supplier, customer, and peer relationships to understand transactions

2. Re-assemble and digest mined data in a relational database

Automated script, query-able framework, and statistical analytics



Aggregate industry sector relationships using financial metrics of public companies

3. Graphically visualize the new relational database using nodal networks


Quantitative analysis of ecosystem using network theory principles



Relative positions determined through force-directed mapping algorithm

Nodal Network Map
Relational
Database
15
From: D. Assanis, S. Zielinki, and P. Adriaens. 2016. New Mobility Industry Analysis: A Value System Perspective. Progress Meeting Presentation to theFord Motor Company, Dearborn MI.

Financial Network Mapping:
Step 1. Bloomberg Supply Chain Data
1.

Supply chain data focus on money flows between companies on both a customer (revenue) andsupplier (cost) basis. They help to predict changes in a company’s business based on events in its
supply chain.

2.

Bloomberg employs both human and computerized methods to aggregate publicly disclosed data.
Because this data set is incomplete, Bloomberg also provides proprietarily quantified supply-chain
data. This proprietary data consists of two types: 1) mathematically derived, and 2) algorithmicallyderived.

16 Start with a dozen companies -> uncover 100s of supply chain companies and industry

sectors -> 1000’s of financial relationships

Financial Network Mapping:
Step 2. Sorting Bloomberg Financial Data in Query-able
Database Structure
1.

Aggregate industry sector relationships (based on existing
individual corporate relationships): Software companies,
telecoms, IT, consumer electronics, car manufacturers

2.

Aggregate financial exposure metrics (% COGS; %SG&A; % revenue, % EBITDA) by industry sector

17Financial Network Map:
Step 3. Visualize Dataset – Example Smart Mobility
Data Set:
129 Industry Sectors
666 Companies
713 Sector Relationships
3140 Total Relationships

Emerging

Figure courtesy of D. Assanis 2015. Produced
under Ford URP awarded to P. Adriaens and S.
Zielinski

Traditional

18

Financial Network Map:
Step 4. Interpreting Maps Using Network Theory•

Node: A single GICS (Global Industry Classification System) industry sector•

Node Size & Label: Indicator of the node’s centrality in the network(betweeness centrality metric)•

Node Color: Industry sector average EBITDA margin – a measure of core
operating profitability•

Edge: Directed transactional relationship between two industry sectors•

Edge Thickness: averaged relative magnitude of financial exposure of thecompanies in these relationships (one company’s revenue is the other’s
direct or indirect cost)•

Distance between the nodes indicates the relative centrality of the industry
segment relative to all other segments

From:
19 D. Assanis, S. Zielinki, and P. Adriaens. 2016. New Mobility Industry Analysis: A Value System Perspective. Progress Meeting Presentation to theFord Motor Company, Dearborn MI.
Note: Anchor and Catalyst Industries were defined as part of the Tekes FiDiPro project awarded to ETLA, The Research Institute of the Finnish Economy,
and Peter Adriaens, Ross School of Business. This was published as an ETLA brief.

Financial Network Map:
Step 5. Smart Mobility Industry Sectors (GICS)
Types of Nodes in
the Industry
structure (based on
network centrality):
Anchorindustries
Closely integrated
supply/value
chainsCatalyst
industries Crossindustry
supply/value
chainsData: Bloomberg

Financial Network Map:
Step 6. Select SMEs (NACE) from Country
Databases
Automobile

Application Software

ValmetVeho Group Oy Ab
Atoy OyBRP Finland Oy
Pegasor Oy
Kabus Oy

Bravioz Oy
Ecomond Oy
Space Systems Finland Oy
EC-Tools Oy
Sunit Oy & Mobisoft Oy
PIEneering Oy

Logistics
Finavia Oyj
Meriaura Oy
SE Mäkinen Logistics Oy
Weegos Oy
HUB Logistics Finland Oy
Ahola Transport AB Oy
Helsingin Taksi-Data Oy
Taksiliiton Yrityspalvelu
OyTransdev Finland Oy
Logistikas Oy
ALD Automotive Oy

Infotripla Oy
E-Bros Oy
Componentality Oy
Western Systems Oy
Ajelo OyCGI Suomi Oy
Ixonos Oyj
Eficode Oy
Ajeco Oy

Wireless Telco
Helpten Oy
M-Motion Ltd Oy

IT/Management
Consulting & Design
Teconer Oy
Taipale Telematics Oy
Mobinet Oy
ILS OyConfidex
Valpastin Oy
EXP Analytics Oy
Sito Oy
Eniram Oy
MediaMobile Nordic Oy
Conexbird Oy
Picodeon Ltd Oy
MovekoTech Oy
Coreorient Oy
Anadium Group Oy
ADA Drive Oy
Cadring Oy
DA-Design
Creanex
Certeum Oy

Technology HW & Storage
Teknoware Oy
EKE-Elektroniikka Oy
TechnoSmart Oy
Selmic Oy
Teiskonen Ltd., Oy
Sabik Oy Ab
SATEL Oy
U-Blox Espoo Oy
Oceanvolt Oy
Nokian Renkaat Oyj
Lumikko Oy
Siemens Osakeyhtiö
Murata Electronics Oy
Aplicom Oy
EKE Group

Data ProcessingiQ Payments

Data: Statistics FinlandFinancial Network Map:
Step 7. KeyStone Compact® Analytics – Smart
Mobility

Data: Bloomberg & Statistics Finlan

Financial Network Map:
Similar Analysis for Smart Grid

Data: Bloomberg & Statistics Finlan

Financial Network Map:
Similar Analysis for Green ChemistryData: Bloomberg & Statistics Finland

Take Home Message:
How Strong are Your Economic Assets in
Different Industry Sectors?
1. Financial network maps using financial metrics andvalue chain information allow for understanding of
global and regional thematic industry structure
2. Network theory provides insights in how industry
sectors are positioned in emerging industries (anchorvs catalyst)
3. Industry classification codes allow us to test how yourcompanies are positioned in thematic industry
structures
4. Multi-asset renewal funds are focused on investing inindustry ecosystems/clusters, instead of in individualcompanies only
5. The view has to be export-oriented, market driven, andaimed at attracting foreign direct investment (FDI)

Take Home Message:
How Strong are Your Economic Assets in Different
Industry Sectors?

Part II. Company Assessment
Value Capture and Investment GradeBusiness Model Investment Risk :KeyStone Compact®

Debt
Risk debt
Illiquid credit
Supplier/buyer credit

Business Model

Equity – traditional
Equity – cash flows
Corporate investment
Project finance…..

Return on Investment (ROI)
expectations

27

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

Non-Financial Risk:
Difficult to Quantify – Important
Risk Factor

KeyStone Compact® addresses non-financial risk (The remainder (25%) is financials.

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

Basic Tenets of Methodology:
Empirical Research from 600 Businesses
1. The strength and investment grade of acompany in a particular industry value
system depends on the type of activity thecompany is engaged in.
2. The value capture (retention of value)
position depends on how the company’s
capabilities (IP, team, skills) can beleveraged in the value chain, relative tocompetition, partners, and buyer/supplier
networks.
3. The investment grade of the company
depends on the upside potential to theinvestor, and the speed/capital efficiency atwhich the company can be scaled.
29

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

Stress-Testing the Business Model:
KeyStone Compact® Emerging Business®

30

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. A

Stress-Testing the Line of Business:
KeyStone Compact® Enterprise®

31

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. A

Algorithmic Risk Analysis:
Data Capture, Curation, Allocation

Allocate
Investment
Grade

CurateAssetsManagement
Partnerships
Firm Type
Product
Funding Sources
Industry Segment
Revenue structure

KeyStone
Risk
ProfilesCaptureAggregate Data
Sources

32
Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

Industry View:
Value Capture Potential
1.

33

Weak business potential: The
capabilities under control of the firm are
far outweighed by what you need fromothers in the value chain; lowdifferentiation

2.

Niche business potential: The
company can easily acquire what itneeds to service market (e.g. licenses,
catalog goods, data); poor differentiation3.

Unclear value capture: Highdependency on others, but the firm hasleverage because of high differentiation(‘you need your partner as much as theyneed you’)4.

High growth potential: The
capabilities to grow your business
depend mainly on generic supply chain
needs to service your market; highly
differentiatedTypical High Value Capture
0% Dependency
70.6% Leveragability
89.5% Replicability
88.9% Connectivity

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. A

Investor View:
Investment Grade1.

Traditionally equity-investable:
majority ownership by investors; driven
by capital efficiency, rapid scalability andsignificant upside potential

2.

Creative equity financing (‘patient
capital’): minority ownership by investors;
often tied to future cash flows (instead ofexits) – driven mainly by value, not speed3.

Non-equity financing: no investor
ownership; includes project finance,
convertible or structured debt; tied toannual/monthly cash flows; often involves
PPP (public-private partnerships)

4.

Bootstrapping/Non-Dilutive Financing:no external investor; often includes
founder’s capital, low cost businessloans, government grants, orbuyer/supplier financing

Typical Equity Investment
80.0% Diversification
84.6% Profitability
80.0% Scalability
81.8% Capital Efficiency

34
Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

KeyStone Compact®
Assessment Process
1. Public Data Inputs/Sources:
 Company websites
 LinkedIn profiles
 News releases
 Crunchbase Financial databases
 CB Insights

2. KeyStone Compact Assessment

3. Predictive Analytics

35

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. A

KeyStone Compact®
Step 1. Financial Network Company Demographics

36

KeyStone Compact® Emerging Business®
Step 2. Position for Value Capture Questions

37

KeyStone Compact® Emerging Business®
Step 3. Investment Grade Questions

38

Keystone Compact® Emerging
Business® Step 4. Algorithmic Training ofCompany Risk Factors

Investment Grade

Value Capture
1.
2.
3.
4.

Value chain dependency
Leverage in value chain
Competitive differentiation
Industry connectivity

1.
2.
3.
4.

Scalability & recurring
revenue
Upside potential/profitability
Market diversification
Capital efficiency

Risk Adjustment
Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

KeyStone Compact® Emerging
Business® Step 5. Mathematic Risk Mapping Model

40

Typical High Value Capture

Typical Equity Investment

0% Dependency
70.6% Leveragability
89.5% Replicability
88.9% Connectivity

80.0% Diversification
84.6% Profitability
80.0% Scalability
81.8% Capital Efficiency

GCCA 2015 Companies:
Value Capture and Investment Grade

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

Taiwan GCCA 2015
Companies:
Value Capture and Growth Position

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

Venture Grade 2015 GCCA
Companies: Traditional Equity

Characteristics
1.
2.
3.
4.
5.
6.

Low dependencies
High industry leverage
Capital efficient
Diversified markets
Rapidly scalable
Experienced
management

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

KeyStone Compact® Validation:
GCCA Top 30 vs TechStars
Failed15%

Failed18%
Acquired36%
Active46%

vs.
Active61%

GCCA Top 30*
Traditional Equity
44

Acquired24%

TechStars 2011**
Graduates (59)*Top-30 equity investable companies out of an average pool of 150-250 companies; tracked since 2011**TechStars is a global accelerator program

Keystone Compact and Keystone Score are trademarks of the Keystone Compact Group, Ltd. All rights

Take Home Message:
How Strong are Your Economic Assets in Different
Industry Sectors?

Part III. Interpreting KeyStone
Analytics
Example: Finnish Smart Grid Companies

【範例】

3
Developing Business Model
Green Solutions
Deployment

Preliminary Results of The
SurveyType of Company
Green energy industry
Distribution PatternSolar
photovoltaic
11%

Hydrogenand Fuel Cell
56%

89% small enterprises
11%89%

Biofuel22%

Solar photovoltaic
BiofuelEnergy Information and Communication
Hydrogen and Fuel Cell

EnergyInformation andCommunication
11%67% companies younger than
10 years
33%

More than 300 employees
49 employees or less

89% completely domestic
Investment
11%

22%

89%

45%
100% Domestic Investment
Overseas Chinese and foreign joint venture
Less than 5 years
10 years (or more)

5 years to 10 years

48

Financial Security
11% sufficient funds

67% non-public fundraising

Insufficien
t funds
22%

33%
67%

Sufficient
funds
11%

Barelysufficient
funds
67%
Public fund-raising

Non-public fund-raising

Insufficient funds

Nearly half of the non-spot transactions
22%

33%

45%

Mostly cash transactions
Mainly based on the non-spot transactions (check, credit card, etc.)
No specific pattern

49

Sufficient funds

Business Overview
Revenue(2013-2015)

%

%

50%

gross profit (2013-2015)
50%

40%

40%

30%

30%

20%

20%

10%

10%

0%

0%

NT$ Million

NT$ Million
2013

2014

2015

2013

2014

Transnational investment / business
%
60%
40%
20%
0%

22%

33%

44%

Yes
No, and no suchconsideration or No, but there issuchplanning
consideration orplanning

50

2015

Products Patterns
Mainly Type Company
Products(hardware)

%
50%
45%
40%
35%
30%
25%
20%

44%

44%

15%
10%

22%

22%

Components

Electricity

5%0%Systems
integration facility

Machineryequipment

51

Market Competition
Most market competition ismoving toward relaxation%

The reasons of market competition
is moving toward relaxation

70%
60%

50%
33%

40%
30%

67%

67%
50%

20%
10%

17%

0%
There are distinct market competitors
Market competition is moving toward relaxation

High market entry
barriers

Few market
entrants due toemerging markets

52

Companies withsegments ofproducts/ services

Sales
56% sale abroad
%

%
70%
60%
50%
40%
30%
20%
10%
0%

Marketing expenditure(20132015)

60%
50%
40%
67%

30%
20%
22%

11%

11%

11%

10%
0%
No marketing
expenditure

Less than NT$1

NT$1~NT$5

NT$ Million
2013

2014

2015

The self-assessment of marketing results
Ineffective marketing
Export oriented
14% 14%

Normal marketing effectExclusive dealer (retail)Government Procurement
Binding main customers

29%

Marketing effect is significant, but still
below expectations

43%
Marketing effect is significant, evenbeyond expectations

53

Business Partnerships
Business impact of thestrategic partnerships

The situation of business
partnerships

43%
22%

78%

67%

57%

11%
No business partnerships
Operating business partnerships
Cooperation with upstream and downstream third-party (suppliers,
service providers, etc.)
To become collaboration party of large enterprises

The company's strategic partnerships are very
important in technology licensing / R & D
The company's strategic partnerships are very
important in products / services sales

54

Intangible Assets (1)The importance of intangible
assetshighimportant for
PRODUCTION
33%
highimportan
t for
SALE
67%

The main types of intangible assets
22%

trademarkIP

56%

non-patent technology

56%

0%

10%

20%

55

30%

40%

50%

60%

Intangible Assets (2)Commercial feasibility of
Intangible assets for sale or
use
60%
50%

A: percentage of R&D
expenditure

56%
44%

A < 5%, 11%
A ≧ 2/3,
22%

40%
30%
20%

5% ≦ A <1/3, 33%

1/2 ≦ A <2/3, 22%10%0%Commercially
feasible, but low
returnnot yet for commercial
operation

1/3 ≦ A <1/2, 11%56

Human Resources (1)A: percentage of full time
employment

Y: Staff’s main age
100%

100%
89%

80%
80%

60%
60%

89%
40%
40%

20%
20%
11%
11%
0%
A < 1/30%0%0%
1/3 ≦ A < 1/2

1/2 ≦ A < 2/3

Y< 30

0%
30≦ Y < 40 40 ≦ Y < 50

A ≧ 2/3

57

0%
Y≧50

Human Resources (2)78% Surveyed enterprises’
management include experts in thesame industry.

44% Surveyed enterprises
have permanent boards ofadvisors.

Not Yet22%

Have
Not Yet

44%

Have
78%

56%

78% Surveyed enterprises’ management
include ENTREPRENEURS.
Not Yet

22%

Have

78%

0%

50%

100%

58

Human Resources (3)Staff’s Competence
22%

Staff’s main educational
backgrounds
60%

56%

22%

56%

50%

22% Most employees can start work without training

40%

22% Some employees need pre-employment training
56% Most employees need pre-employment training

30%

22%

22%

20%

Staff educational training

10%0%mostly Bachelor
degreemostly Master
degreemostlyhigh school
graduates

Holdregularly
22%
No training
22%

Not hold
regularly
56%

59

Strength And Challenges
The biggest ADVANTAGE

The biggest CHALLENGE

Company
scale isgrowing
11%

Company
has high
competitive
products orservice.
56%

Company
has strong
intangible
assets.
33%

Lack oftalents
11%

Lack of industry
infrastructure
22%
Lack ofparts
supplier
11%

Government policy
as impediments
45%

60

Market has
not yetformed11%

policy advices (1)All (100%) Surveyed enterprises suggest
add or amend policy infrastructure
Policy Supporting

Policy Suggestions
70%
60%

has incentives
or grants
22%

50%
40%
30%

67%

20%

No legislation orlack of policy
instruments
78%

33%
22%

10%
0%
Legislation oramend laws

Grants61

Tax incentives

policy advices (2)78% Surveyed enterprises hope to increase renewable energy
options in the energy market to help their business
Service-oriented frameworks for intelligent building
management

11%

Value-added services for energy consumption data

11%

Electricity liberalization

44%

Holding distribution channel relationships

11%

Brand driving

44%

Promoting Demand Response

11%

Increasing renewable energy options in the energy market

78%

Promoting regional energy autonomy

44%

Promoting Aggregator system

22%
0%

10%

20%

30%

40%

50%

62

60%

70%

80%

90%

Conclusions
1. Most surveyed Taiwan green energy enterprises are young,small and totally domestic capital with delicate financial
security.
2. Most surveyed enterprises export their products and gain
revenue, but gross margin(毛利率) is generally lower than20%.
3. Most surveyed enterprises need business partnership, mainly
in cooperation with upstream and downstream third parties.
4. Most surveyed enterprises face mild competition in the market
because of their relative high competitiveness, but lack ofpolicy legislation, incentives and industry infrastructure are
their biggest challenges.
5. Most surveyed enterprises hope to increase renewable energy
options in the Taiwan energy market to help their business63
expansion.