Japanese industry has to decarbonize. Large players are turning to Emerald for help

The need to tackle climate change and emerging regulations are compelling companies in Japan to go green. The country is racing to decarbonize, to meet both self-imposed targets and expectations of global peers and investors. But it needs to speed up: according to Climate Action Tracker, Japan’s policies and actions undershoot the internationally agreed-upon goal of limiting warming to an acceptable level.

Power and industry are the country’s two biggest polluters, each accounting for over a third of Japan’s emissions, according to McKinsey. These sectors are now starting to recognize the urgency of the task at hand. But given the longstanding and well-honed operations and processes of their firms, rooting out greenhouse gases (GHGs) will be a tall order. Innovation will be key: in the words of one recent study: “It is crucial to upgrade research and development (R&D) activities to enable future industry-sector [GHG] mitigation” in Japan.

Adopting open innovation is one way to reach those goals. Nabtesco Corporation, a major Japanese industrial player with a 40% market share globally in engine remote control systems for maritime vessels, typifies this journey. The company aims to be carbon-free by 2050. Innovations gleaned via collaboration with startups are a vital element of this goal.

This is where Emerald comes in. It has engaged in a corporate venture capital (CVC) mandate for Nabtesco since 2018. This means that it manages all the investment activities of Nabtesco’s venture arm. In 2021, Emerald sourced and led the closing for a deal between Nabtesco Technology Ventures and DeepSea, a Greek startup whose artificial intelligence systems help ships manage energy and resources—a key piece of the decarbonization puzzle that DeepSea is committed to helping solve.

To make the deal succeed, Emerald worked closely with both Nabtesco and DeepSea’s R&D teams. Emerald’s in-house experts spent several months embedded with both companies’ scientists to make sure Nabtesco could benefit from DeepSea’s cutting-edge technology, bridging cultural and language divides between the two parties. According to Hiroshi Nerima, head of Nabtesco Technology Ventures, Emerald’s two biggest strengths are its engineering and technical expertise—a rare trait among global venture capital funds—and its focus on the needs of its corporate limited partners, rather than simply maximizing financial returns.

Partnerships like these aim to pave medium- and long-term pathways to innovation. They can help companies like Nabtesco break out of Japan’s typical risk-averse corporate culture and boost its corporate sector’s low productivity and global competitiveness. Just as important, it can help it to meet fast-approaching net-zero targets.

The deal now serves as a template for undertakings meant to introduce crucial low-carbon technologies into Japan’s industrial sector. Since the launch of the Nabtesco-Emerald partnership, Emerald has welcomed other Japanese industrial conglomerates, including Idemitsu, Eneos, and Murata, into its funds. The kind of bespoke partnership Emerald forged between DeepSea and Nabtesco is allowing the Japanese firm to leapfrog the traditionally slow-moving process of invention and discovery at scale. It is catalyzing a rapid pivot toward a more nimble, sustainable future.