Sustainable Financial Instruments

Embedding environmental, social, and corporate governance factors into investments

Sustainable Finance

<div>
 
 This report will look at sustainable financial instruments as investment and funding instruments that integrate environmental, social, and governance (ESG) considerations into their design and decision-making processes...
 
</div>

<div>
 <ul>
 <li>
 
 Overview and Types of SFIs: 
 Sustainable financial instruments (SFIs) integrate environmental, social, and governance (ESG) considerations, aiming for financial returns and positive sustainability outcomes. They are classified into sustainable debt financial instruments (SDFIs) and sustainable equity financial instruments, with a focus on SDFIs like green bonds and social bonds in the environmental sector.
 
 </li>
 <li>
 
 Issuer Motivations and Market Growth: 
 Companies are increasingly adopting SDFIs due to stakeholder pressure for sustainability and favorable pricing terms. Financial institutions and non-financial corporates are significant issuers, with green bonds being predominant. The global market for sustainable debt reached USD 4.2 trillion by September 2023, led by green bonds.
 
 </li>
 <li>
 
 Investor Demand and Regulatory Support
 : Institutional investors are prioritizing sustainability, driving the demand for SDFIs. Regulatory bodies are promoting sustainable finance through incentives, supportive environments, and transparency requirements, despite the complexity of diverse regulations across regions.
 
 </li>
 <li>
 
 Investment Characteristics and Greenium
 : SDFIs channel funds to projects with sustainability benefits and tie financial terms to achieving sustainability targets. &quot;Greenium&quot; refers to the price premium investors accept for green bonds, though it is not consistently cheaper due to transparency and reporting costs.
 
 </li>
 <li>
 
 Challenges and Future Impacts
 : Transparency and avoiding greenwashing are crucial for SDFI subscription and achieving greenium. While SDFIs provide direct sustainability impacts and business efficiencies, lack of transparency and instances of greenwashing, like in Volkswagen&rsquo;s case, can negatively impact issuer credibility and financial terms.
 
 </li>
 </ul>
 
 
</div>

<div>
 <ul>
 <li>
 
 Overall activity witnessed a slight dip during Q1 2024. 
 
 </li>
 <li>
 
 The AI revolution continues to fuel collaborations among Big Tech. 
 
 </li>
 <li>
 
 Investment activity slowed and M&amp;A activity remained muted. 
 
 </li>
 </ul>
 
 
</div>

<div>
 <ul>
 <li>
 
 Overall activity witnessed a slight dip (30 activities tracked in Q1 2024 vs. 36 tracked in Q4 2023)
 : In particular, after a notable rebound during Q4 2023, activities among retailers slowed during the quarter, accounting for only 10% of all activities tracked (down from 33% during Q4 2023).
 
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 <a href="https://sp-edge.com/companies/314571">
 Alphabet
 </a>
 continued to dominate activity: 
 The tech giant accounted for 63% of all Big Tech activity and 57% of all healthcare activity. Over two-thirds of its activities were concentrated in primary care, with 
 <a href="https://sp-edge.com/industry/106">
 Hospital Management
 </a>
 and 
 <a href="https://sp-edge.com/industry/29">
 Telehealth
 </a>
 being the main focus. After gradually making inroads during previous quarters, Alphabet, through Isomorphic Labs, picked up activity around 
 <a href="https://sp-edge.com/industry/13">
 AI Drug Discovery
 </a>
 . In addition, the company showed interest in the 
 <a href="https://sp-edge.com/industry/98">
 Clinical Decision Support Systems
 </a>
 , 
 <a href="https://sp-edge.com/industry/79">
 Hospital Interoperability
 </a>
 , 
 <a href="https://sp-edge.com/industry/32">
 Digital Wellness
 </a>
 , and 
 <a href="https://sp-edge.com/industry/39">
 Beauty Tech
 </a>
 domains.&nbsp;
 
 </li>
 </ul>
 
 
 
 <ul>
 <li>
 
 As in Q4 2023, 
 <a href="https://sp-edge.com/companies/29760">
 CVS Health
 </a>
 was the only active company among the retailers. 
 Although at reduced levels compared with the previous quarter (10% of overall activity in Q1 2024 compared with 11% in Q4 2023), the retail giant pursued both partnerships and investments in the healthcare space.&nbsp;
 
 </li>
 </ul>
 
 
</div>

Tech & retail giants in healthcare (Q1 2024): Big Tech forges ahead, cashing in on AI revolution

<div>
 <ul>
 <li>
 
 Funding raised dominated by mega rounds in the EV Economy industry
 
 </li>
 <li>
 
 Product updates and partnerships in Auto Tech to further develop autonomous vehicles, enhance the safety, and integrate AI features
 
 </li>
 <li>
 
 EV Economy and Passenger eVTOL Aircraft industries saw partnerships to expand and enhance the respective infrastructure ecosystem
 
 </li>
 </ul>
 
 
</div>

<div>
 <h1>
 Key takeaways
 </h1>
 <ul>
 <li>
 
 Funding
 
 <ul>
 <li>
 
 Mega rounds in the EV Economy industry drive funding growth: 
 Passenger Mobility Tech raised USD 7.8 billion in Q1, up 178.2% YoY and 26.2% QoQ. This growth was largely led by EV battery developers and passenger EV manufacturers (such as 
 <a href="https://sp-edge.com/companies/602790">
 NorthVolt
 </a>
 and 
 <a href="https://sp-edge.com/companies/30178">
 Lucid Motors)
 </a>
 in EV Economy with support from ride-hailing service providers in Shared Mobility (such as 
 <a href="https://sp-edge.com/companies/7855">
 Lyft
 </a>
 and 
 <a href="https://sp-edge.com/companies/516293">
 inDrive).
 </a>
 However, funding declined in the Auto Tech, Passenger eVTOL Aircraft, and Smart Mobility Information industries. Technological complexities and regulatory hurdles may delay autonomous vehicle deployment at scale&mdash;hence, the industry witnessed funding support withdrawals (e.g. General Motors&rsquo; [GM&rsquo;s] 
 <a href="https://sp-edge.com/updates/26083">
 Cruise
 </a>
 , and 
 <a href="https://sp-edge.com/updates/26156">
 Motional).
 </a>
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 
 Product updates
 
 <ul>
 <li>
 
 Autonomous and automated driving tech updates and AI feature integrations fueled the Auto Tech industry: 
 Autonomous vehicle tech companies 
 <a href="https://sp-edge.com/companies/203208">
 (Amazon&rsquo;s
 </a>
 Zoox,
 <a href="https://sp-edge.com/companies/314571">
 
 Alphabet&rsquo;s
 </a>
 Waymo, and
 <a href="https://sp-edge.com/companies/588243">
 
 Pony.ai)
 </a>
 and advanced driving assistance systems (ADAS) makers 
 <a href="https://sp-edge.com/companies/14289">
 (BMW,
 </a>
 
 <a href="https://sp-edge.com/companies/12739">
 Mobileye,
 </a>
 
 <a href="https://sp-edge.com/companies/468302">
 Luminar,
 </a>
 and 
 <a href="https://sp-edge.com/companies/115841">
 Magna International)
 </a>
 continued to enhance and update their respective technologies. However, product discontinuations, closures, and layoffs in the industry reflect the challenges in the sector.
 
 </li>
 <li>
 
 EV updates centered on new EV models, infrastructure developments, and improving battery supply: EV Economy
 saw a surge in innovation and growth, with new EV models launched by 
 <a href="https://sp-edge.com/companies/131904">
 Rivian,
 </a>
 <a href="https://sp-edge.com/companies/14289">
 
 BMW,
 </a>
 <a href="https://sp-edge.com/companies/8785">
 
 Toyota,
 </a>
 <a href="https://sp-edge.com/companies/113623">
 
 Honda,
 </a>
 <a href="https://sp-edge.com/companies/679181">
 
 VinFast,
 </a>
 and
 <a href="https://sp-edge.com/companies/1692">
 
 Tesla.
 </a>
 Additionally, efforts to fortify the EV ecosystem were evident, as companies focused on improving charging infrastructure. EV battery manufacturers also dedicated efforts to augment battery supply and advance technology this quarter.
 
 </li>
 <li>
 
 Smart Mobility Information saw geographic expansion, while Passenger eVTOL commercialization began: Smart Mobility Information 
 players experienced significant geographic expansions. Significant milestones were achieved in 
 Passenger eVTOL Aircraft
 , with
 <a href="https://sp-edge.com/companies/706634">
 
 LIFT Aircraft
 </a>
 launching the world's first commercial customer eVTOL flights, while others continued to progress with the launch of online aircraft sales and unveiling prototypes.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 
 Partnerships
 
 <ul>
 <li>
 
 NVIDIA supplied ADAS compute platforms to Auto Tech players, while others focused on AI integrations: 
 <a href="https://sp-edge.com/companies/4353">
 NVIDIA
 </a>
 was seen forging back-to-back deals with EV manufacturers and technology developers for the advancement of safety and driving assistance technologies. AI integrations remained a key trend, with industry players looking to update their ADAS and connected vehicle features with AI integrations.
 
 </li>
 <li>
 
 EV Economy and Passenger eVTOL Aircraft industries saw expansion and enhancement of charging infrastructure: 
 Notable collaborations in 
 EV Economy
 included major automakers, energy companies, and highway systems teaming up with third parties to expand EV charging networks or access to existing networks. 
 Passenger eVTOL
 Aircraft disruptors also concentrated on infrastructure building while some also looked to expand their geographical coverage.
 
 </li>
 <li>
 
 Smart Mobility Information advanced multimodal mobility management: 
 Players working on multimodal mobility management technologies looked to integrate advanced technologies to improve user experience and expand geographical coverage.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 
 M&amp;As
 
 <ul>
 <li>
 
 Q1 saw limited activity in industry consolidations:
 Only two notable M&amp;A deals took place and were related to the Auto Tech and Smart Mobility Information industries: 1) 
 <a href="https://sp-edge.com/companies/4918">
 Karma Automotive
 </a>
 acquired 
 <a href="https://sp-edge.com/companies/12580">
 Airbiquity
 </a>
 to enhance its EVs with advanced connected software capabilities and 2) 
 <a href="https://sp-edge.com/companies/254396">
 ParkHub
 </a>
 merged with 
 <a href="https://sp-edge.com/companies/8828">
 JustPark,
 </a>
 aiming to bolster parking solutions and geographical reach across North America and the UK.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 
 Regulations
 
 <ul>
 <li>
 
 As the landscape for Passenger Mobility Tech evolves rapidly, it is shaped by regulatory frameworks, government funding, and geopolitical considerations: 
 Companies worldwide are advancing by securing approvals for robotaxi deployments, with notable progress in the US and China. However, local concerns in the US over the safety of autonomous vehicle deployments have led to legal and legislative pushbacks against state-level authorizations. Concurrently, significant investments in EV and smart mobility technologies from authorities aim to bolster the adoption of EVs and improve infrastructure for safer, smarter mobility. Amid this push toward innovative transportation solutions, US national security concerns over Chinese auto tech companies introduce additional regulatory complexities.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 
 Outlook
 
 <ul>
 <li>
 
 Active engagements from leading OEMs in the 
 Auto Tech
 space signal a rising trend in AI integration within ADAS and connected car technologies. We noticed companies are increasingly collaborating with AI specialists, paving the way for a generation of vehicles that are smarter and more secure&mdash;a trend observed in past quarters as well. While companies strive for long-term commercial success, resource reallocation has led to layoffs, which may persist as businesses adjust capacities, potentially leading to further layoffs.
 
 </li>
 <li>
 
 The ongoing expansion of the 
 EV ecosystem,
 particularly in charging infrastructure, and introducing new models from manufacturers is expected to bolster EV adoption. Improved infrastructure, a wider range of models, advancements in battery technology, and customer incentives are key trends contributing to this positive outlook, consistent with observations from previous quarters.
 
 </li>
 <li>
 
 Smart Mobility Information&rsquo;s 
 global expansion indicates widespread demand for advanced mobility solutions. As smart mobility becomes more user-centric by incorporating personalized features and improved accessibility, the sector is poised for a dynamic and technology-driven future.
 
 </li>
 <li>
 
 Passenger
 
 eVTOL Aircraft
 should continue marching toward commercialization as evidenced by LIFT Aircraft&rsquo;s customer launch, Pivotal&rsquo;s online sales opening, and several other partnerships with infrastructure providers, indicating positive signs for commercialization in the future.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
</div>

Passenger Mobility Tech (Q1 2024): Tech upgrades pave way for safer, smarter vehicles; partnerships strengthen EV ecosystem

<div>
 
 Mixed reality (spatial computing) devices are likely to proliferate
 as Apple&rsquo;s Vision Pro headset was launched in the US, alongside significant investor interest in the space. 
 
 
 MEP players in the space will likely focus on bolstering platform graphical fidelity to improve user immersion
 , with most startups in the space lagging behind the current graphical prowess of modern-day videogames.
 
 
 
</div>

<div>
 <h1>
 Key takeaways
 </h1>
 
 
 <ul>
 <li>
 
 Product updates
 
 <ul>
 <li>
 
 CES heralded multiple XR device announcements: 
 The XR industry&nbsp; recorded 15 device announcements in light of CES 2024, notably 
 <a href="https://sp-edge.com/companies/337">
 Sony
 </a>
 &rsquo;s 
 <a href="https://sp-edge.com/updates/25277">
 spatial content creation
 </a>
 system and the 
 <a href="https://sp-edge.com/updates/25175">
 Snapdragon XR2+ Gen2
 </a>
 chip, offering improved spatial computing experiences for devices. The 
 <a href="https://sp-edge.com/companies/1658">
 Apple
 </a>
 Vision Pro 
 <a href="https://techcrunch.com/2024/02/14/apples-vision-pro-now-has-over-1000-apps-specifically-designed-for-the-new-device/">
 launch
 </a>
 saw over 1,000 apps being created for it, with non-entertainment use cases focusing on surgical visualization. Other players in the space recorded 34 software updates, focused on quality-of-life improvements for headsets and AR virtual try-on features.&nbsp;
 
 </li>
 <li>
 
 MEPs focused on improving digital avatars
 : The MEP industry recorded 21 product updates, including two GenAI updates focused on streamlining virtual asset creation. Other updates focused on improving digital avatars, which notably included 
 <a href="https://sp-edge.com/companies/288018">
 Epic Games
 </a>
 &rsquo; integration of 
 <a href="https://sp-edge.com/updates/27762">
 MetaHumans
 </a>
 into Fortnite Creative, allowing for the creation and animation of photorealistic NPCs. Additionally, 
 <a href="https://sp-edge.com/companies/509934">
 Decentraland
 </a>
 planned to launch a desktop client version for its platform, seeking to bolster graphical fidelity.&nbsp;
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 Partnerships
 
 <ul>
 <li>
 
 XR partnerships surged, focusing on product integrations:
 The XR sector recorded 41 partnerships focused on product development (76%), which notably included 
 <a href="https://sp-edge.com/companies/5">
 Meta
 </a>
 &rsquo;s 
 <a href="https://sp-edge.com/updates/27052">
 partnership
 </a>
 with 
 <a href="https://sp-edge.com/companies/2894">
 LG
 </a>
 to launch an XR device, estimated to arrive in 2H 2025. Additionally, Xreal announced collaborations to integrate its AR glasses for several use cases (AR-based driving navigation, in-vehicle AR entertainment, and holographic meetings).&nbsp;&nbsp;
 
 </li>
 <li>
 
 Experience launches were heavily skewed toward Roblox:
 We tracked 34 brand collaborations for MEP for the quarter (40 in Q4 2023), with virtual world launches skewed heavily toward 
 <a href="https://sp-edge.com/companies/22278">
 Roblox
 </a>
 (20), while Fortnite launches halved QoQ (from 12 to six). Firms in the consumer discretionary industry beat out media and entertainment companies in terms of experience launches (13 and 12, respectively).&nbsp;
 
 </li>
 </ul>
 </li>
 <li>
 
 M&amp;A
 
 <ul>
 <li>
 
 XR recorded a series of multi-focused acquisitions: 
 The industry recorded five acquisitions, which most notably included 
 <a href="https://sp-edge.com/companies/297741">
 CREEK &amp; RIVER
 </a>
 &rsquo;s 
 <a href="https://sp-edge.com/updates/26152">
 acquisition
 </a>
 of VR headset manufacturer Shiftall from Panasonic and 
 <a href="https://sp-edge.com/companies/1961979">
 Infinite Reality
 </a>
 &rsquo;s 
 <a href="https://sp-edge.com/updates/27849">
 acquisition
 </a>
 of game creation platform Ethereal Engine for USD 76 million.
 
 </li>
 <li>
 
 The MEP sector recorded one announcement&mdash;Yuga Labs&rsquo; acquisition of Proof, creator of the Moonbirds NFT collection, as it sought to integrate the NFTs into its Otherside metaverse.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 Funding&nbsp;
 
 <ul>
 <li>
 
 Magic Leap recorded the first mega round since 2021: 
 XR
 
 startups raised USD 842 million in 22 rounds, nearly tripling QoQ and rising by 1.6x YoY, backed by AR headset manufacturer 
 <a href="https://sp-edge.com/companies/176239">
 Magic Leap
 </a>
 &rsquo;s USD 590 million 
 <a href="https://sp-edge.com/updates/25567">
 debt financing
 </a>
 round. Funding interest extended to other AR device manufacturers as well&mdash;
 <a href="https://sp-edge.com/companies/393805">
 Rokid
 </a>
 (
 <a href="https://sp-edge.com/updates/25305">
 USD 71 million
 </a>
 ) and 
 <a href="https://sp-edge.com/companies/534005">
 Xreal
 </a>
 (
 <a href="https://sp-edge.com/updates/26012">
 USD 60 million
 </a>
 &mdash;making it a tech unicorn.&nbsp;
 
 </li>
 <li>
 
 Disney&rsquo;s foray into gaming fuels Fortnite expansion:
 While funding levels for startups continued to be dismal, Epic Games&rsquo; USD 1.5 billion 
 <a href="https://sp-edge.com/updates/26501">
 giga-investment
 </a>
 from 
 <a href="https://sp-edge.com/companies/371">
 Disney
 </a>
 showcases growing investor appetite for MEPs with strong player bases, compared with smaller Web3-backed platforms.&nbsp;
 
 </li>
 <li>
 
 The funds are intended for building an &ldquo;expansive and open games and entertainment universe,&rdquo; which will be integrated with Epic Games&rsquo; Fortnite and bring in content based on Disney&rsquo;s prolific IPs (Marvel, Star Wars, Avatar, etc). The company previously launched a series of themed metaverse experiences in 2023, following a similar USD 2 billion investment by Sony and KIRKBI (Lego&rsquo;s parent company) in 2022.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 
 <ul>
 <li>
 
 Outlook
 
 <ul>
 <li>
 
 Mixed reality (spatial computing) devices are likely to proliferate
 as Apple&rsquo;s Vision Pro headset was launched in the US, alongside significant investor interest in the space. This also aligns with startup accelerator Y Combinator&rsquo;s 
 <a href="https://techcrunch.com/2024/02/14/y-combinator-puts-out-a-new-call-for-startups-in-areas-like-ai-spatial-computing-climate-tech-and-more/">
 addition
 </a>
 of spatial computing startups for potential funding, providing impetus for future industry growth. Further, the GenAI boom is likely to
 usher in on-device AI features, including large language model (LLM) functionalities
 for the completion of day-to-day tasks, paving the way for mainstream adoption.
 
 </li>
 <li>
 
 MEP players in the space will likely focus on bolstering platform graphical fidelity to improve user immersion
 , with most startups in the space lagging behind the current graphical prowess of modern-day videogames&mdash;a key to reigniting investor interest. 
 GenAI adoption will likely continue as well
 , as firms look to streamline user-generated content (UGC) development, add more complex experiences, and improve non-player character (NPC) interactions. Further, exchanges 
 expanding cryptocurrency derivatives to non-US regions
 may provide respite for Web3 MEPs.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
</div>

XR and MEP (Q1 2024): An Apple-backed XR spatial computing surge; Disney’s USD 1.5 billion fuels Fortnite expansion

<div>
 <ul>
 <li>
 
 Overall activity of Big Tech and retail players picked up during Q4 2023. 
 
 </li>
 <li>
 
 New GenAI products spur Big Tech collaborations. 
 
 </li>
 <li>
 
 Investment activity picked up during the quarter, while M&amp;A activity continued to be muted. 
 
 </li>
 </ul>
 
 
</div>

<div>
 <ul>
 <li>
 
 Overall activity of Big Tech and retail players picked up during Q4 2023. 
 In particular, activities among retailers witnessed an uptick during the quarter, accounting for 33% of all activities during Q4 (up from 15% during Q3 2023). 
 
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 <a href="https://sp-edge.com/companies/314571">
 Alphabet
 </a>
 &rsquo;s dominant presence in healthcare continued. 
 The tech giant accounted for 33% of all Big Tech activity and 22% of all healthcare activity. Primary care remained the main focus, with half of its activities concentrated in this area. Within primary care, Alphabet showed interest in areas such as 
 <a href="https://sp-edge.com/industry/106">
 Hospital Management
 </a>
 and 
 <a href="https://sp-edge.com/industry/29">
 Telehealth
 </a>
 while also broadening its focus into other areas such as 
 <a href="https://sp-edge.com/industry/13">
 AI Drug Discovery
 </a>
 , 
 <a href="https://sp-edge.com/industry/56">
 Precision Medicine
 </a>
 , and 
 <a href="https://sp-edge.com/industry/3">
 Mental Health Tech
 </a>
 .
 
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 New GenAI products spur Big Tech collaborations. 
 New product launches from 
 <a href="https://sp-edge.com/companies/314571">
 Alphabet
 </a>
 (such as its 
 <a href="https://hitconsultant.net/2023/12/13/google-cloud-launches-healthcare-focused-generative-ai-models/">
 MedLM
 </a>
 family of GenAI models) and new AI and GenAI product launches by 
 <a href="https://sp-edge.com/companies/201465">
 Microsoft
 </a>
 (such as new data solutions within Microsoft Fabric, GenAI models of their own, and medical transcriptions services) were catalysts for partnerships by Big Tech in the healthcare space.
 
 </li>
 </ul>
 
 
</div>

Tech & retail giants in healthcare (Q4 2023): Overall activity picks up as retailers rebound

<div>
 
 XR:
 
 We maintain a neutral outlook for the industry. 
 Although funding in 2023 slowed compared with last year, incumbents in the sector continued to launch flagship products with noticeable mixed-reality-focused improvements compared with their predecessors.
 
 
 MEP: We maintain a negative outlook for the industry
 given the significant funding drop for the industry.
 
</div>

<div>
 <h1>
 Key takeaways
 </h1>
 <ul>
 <li>
 
 Product updates
 
 <ul>
 <li>
 
 XR: 
 Q4 recorded 34 software updates, which primarily included the incorporation of GenAI features into existing products. Most notable were 1) Snap&rsquo;s text-based lens generation alongside a 3D face mask generator and 2) Microsoft's integration of Copilot into its Dynamics 365 Guides platform, aimed at assisting frontline workers in mixed reality. The sector also had six hardware announcements, two from incumbents. Varjo&rsquo;s XR-4 series Focal Edition launch was the most notable, which claimed to be the first headset to allow gaze-directed autofocus mixed reality pass-through features, which mimic the behavior of the human eye.&nbsp;
 
 </li>
 <li>
 
 MEP
 : The quarter recorded 19 product updates (18 in Q3), backed by multiple updates from 1) Animoca Brands to bolster user-generated content (UGC) on its &ldquo;The Sandbox&rdquo; metaverse and 2) quality-of-life improvements to Meta&rsquo;s Horizon Worlds. Additionally, Rec Room launched Fractura, demonstrating the use of GenAI in creating virtual worlds.&nbsp;
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 Partnerships
 
 <ul>
 <li>
 
 XR:
 The sector recorded 27 partnerships in Q4, heavily skewed toward product development efforts (~81% of the total). Notable updates included Apple&rsquo;s integration of ARKit into the Salesforce Field Service app and BMW&rsquo;s partnership with Varjo to launch a mixed reality racing experience.&nbsp;
 
 </li>
 <li>
 
 MEP:
 We tracked 40 brand collaborations for the quarter (30 in Q3 2023). Similar to previous quarters, media and entertainment companies (14) were the most common in terms of experience launches. There was also a trend of automotive manufacturers launching virtual worlds, focused on their upcoming electric vehicles (BMW, Honda, Nissan, Lamborghini, and &Scaron;koda Auto).
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 M&amp;A
 
 <ul>
 <li>
 
 XR: 
 Q4 included 1) gaming conglomerate Aonic&rsquo;s acquisition of VR game development studio nDreams for USD 110 million and 2) VR-based mental health startup BehaVR&rsquo;s merger with virtual chronic pain management company Fern Health to form RealizedCare.
 
 </li>
 <li>
 
 MEP: 
 The sector recorded no M&amp;A; companies focused on organic growth opportunities instead.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 Funding&nbsp;
 
 <ul>
 <li>
 
 XR: 
 19 startups raised USD 286 million, rebounding 28% from USD 223 million in Q3 but down 23% YoY. This brought 2023 total funding to USD 1,109 million, a 29% YoY decline. Notable rounds during the quarter included Rokid&rsquo;s USD 112 million round (making the firm a tech unicorn), Mojo Vision&rsquo;s USD 44 million round, and XPANCEO&rsquo;s USD 40 million round.
 
 </li>
 <li>
 
 MEP: 
 Five companies raised USD 28 million (down 41% YoY and 39% QoQ), helped by Animoca Brands&rsquo; USD 11.9 million funding round. This was the lowest level of quarterly funding since we initiated coverage of the sector in Q4 2022. Funds raised in 2023 amounted to USD 169 million, a 91% drop compared with USD 1,829 million raised in 2022.&nbsp;
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 
 <ul>
 <li>
 
 Outlook
 
 <ul>
 <li>
 
 XR:
 
 We maintain a neutral outlook for the industry. 
 Although funding in 2023 slowed compared with last year, incumbents in the sector continued to launch flagship products (Meta&rsquo;s Quest 3 and HTC&rsquo;s Vive XR Elite) with noticeable mixed-reality-focused improvements compared with their predecessors. While Apple&rsquo;s Vision Pro is leagues ahead of its competitors in terms of eye-tracking and headset resolution, affordability remains a key pain point.&nbsp;
 
 </li>
 <li>
 
 On a positive note, advancements in the GenAI space
 could bolster user immersion and lower development costs
 for startups in the sector. Use cases include streamlined content creation (developing virtual worlds for video games, training simulations, and AR objects), alongside virtual assistants, dynamic non-player-character interactions, and quest generation in video games.&nbsp;
 
 </li>
 <li>
 
 MEP: We maintain a negative outlook for the industry
 . The severe drop in funding for the industry has curtailed growth opportunities for many of the smaller players in the sector. Notable exceptions include Roblox and Fortnite Creative, which continue to see strong player bases and recurring revenue without the need for external funding.&nbsp;
 
 </li>
 <li>
 
 Similar to XR, while GenAI provides an opportunity for the sector to streamline virtual world creation, user immersion and retention will still be impeded by the lower graphical fidelity of most platforms.&nbsp;
 
 </li>
 </ul>
 </li>
 </ul>
 
 
</div>

XR and MEP (Q4 2023): XR GenAI adoption accelerates alongside funding rebound

<div>
 <ul>
 <li>
 
 Funding raised dominated by mega rounds across all hubs
 
 </li>
 <li>
 
 Hardware and software updates to further develop autonomous vehicles and enhance the safety of the driving experience
 
 </li>
 <li>
 
 Incumbents partner to enhance the EV charging ecosystem
 
 </li>
 <li>
 
 Auto Tech and Passenger eVTOL players obtained approval from regulatory authorities, marking significant strides toward full commercialization
 
 </li>
 </ul>
 
 
</div>

<div>
 <ul>
 <li>
 
 The mobility sector raised USD 4.7 billion in Q3, up 46.7% YoY, with all hubs witnessing an increase in funding. 
 
 </li>
 <li>
 
 In the Auto Tech sector, the emphasis was on the ongoing refinement of product hardware and software to usher in innovative features for autonomous vehicles and enhance the safety of the driving experience. In the EV Economy space, most of the product updates were related to passenger EV manufacturing. 
 
 </li>
 <li>
 
 Three-fifths of&nbsp;incumbent partnerships in the EV Economy industry were in the EV charging infrastructure segment, while Auto Tech-related incumbent partnerships mostly focus on developing driver assistance systems (ADAS) and autonomous vehicles. Disruptors in the passenger eVTOL Aircraft industry were also actively looking to establish the necessary infrastructure for operations via partnerships while they also secured orders to supply aircraft.
 
 </li>
 <li>
 
 Only two major M&amp;A deals were reported in Q3 2023, while the mobility sector continued to witness going public via SPAC deals during the quarter.
 
 </li>
 <li>
 
 Q3 saw several Auto Tech and Passenger eVTOL players obtaining approval from regulatory authorities in the US and other geographies, marking significant strides toward full commercialization. However, safety concerns continue to be a bottleneck.
 
 </li>
 </ul>
 
 
</div>

Mobility (Q3 2023): Partnerships strengthen EV ecosystem; self-driving regulatory approvals brighten outlook

<div>
 <ul>
 <li>
 
 Regulators propose laws to improve crypto-related tax compliance and safeguard investors
 
 </li>
 <li>
 
 Funding recovers on the back of mega deals, which accounted for 86% of total funds raised
 
 </li>
 <li>
 
 Notable product updates from incumbents across FinTech verticals
 
 </li>
 </ul>
 
 
</div>

<div>
 
 This Edge Insight focuses on notable activities related to the sectors covered by SPEEDA Edge under the FinTech Services vertical from January 2023 to June 2023 (1H 2023): FinTech: Banking and Infrastructure, Wealth Tech and Sustainable Finance, InsurTech, FinTech: Blockchains, and FinTech: Payments.
 
 <hr/>
 <h1>
 Key takeaways
 </h1>
 <ul>
 <li>
 <h3>
 Funding:
 </h3>
 <ul>
 <li>
 
 Significant slowing in funding volumes; mega deals accounted for three-fourths of all funding: 
 FinTech Services saw total funding declining 43% YoY to USD 13.5 billion. However, the sector witnessed 20 mega deals (USD 100 million+), which collectively raised more than USD 10.0 billion (~75% of total). Leading payment services startup 
 <a href="https://sp-edge.com/companies/57000">
 Stripe
 </a>
 secured the largest amount of funding by raising USD 6.5 billion in 
 <a href="https://sp-edge.com/updates/17162">
 Series I
 </a>
 financing, achieving a valuation of USD 50 billion.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 <h3>
 Regulations: 
 </h3>
 <ul>
 <li>
 
 Stricter laws being finalized for cryptocurrency exchanges and digital tokens issuers: 
 The 
 <a href="https://www.reuters.com/technology/eu-states-approve-worlds-first-comprehensive-crypto-rules-2023-05-16/">
 Markets in Crypto Assets
 </a>
 regulation finalized in May 2023 (to take effect from 2024) was the first set of laws aimed at regulating crypto exchanges and digital token issuers. This regulation offers clear definitions for crypto assets and enforces laws pertaining to governance, reporting, and capital requirements of such exchangers and issuers. In the same month, the International Organization of Securities Commissions (IOSCO) also published a 
 <a href="https://www.reuters.com/business/watchdog-proposes-first-set-global-rules-crypto-sector-2023-05-23/">
 set of standards and policy recommendations
 </a>
 proposing a global approach to regulating the crypto industry.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 <h3>
 Product updates:
 &nbsp;
 </h3>
 <ul>
 <li>
 
 Complementary offerings abundant amid some notable launches from incumbents: 
 During 1H 2023, we counted 
 70+
 product launches, which focused on complementing existing offerings, diversifying business models, and creating additional revenue streams in response to challenging market conditions. For instance, certain neobanks launched investing platforms and premium subscription services, such as 
 <a href="https://sp-edge.com/companies/220119">
 Revolut
 </a>
 , which launched a new subscription plan called 
 <a href="https://sp-edge.com/updates/15855">
 Ultra
 </a>
 and a 
 <a href="https://sp-edge.com/updates/19814">
 robo-advisory
 </a>
 platform, while neo-insurers pivoted toward distribution services (Wefox&rsquo;s 
 <a href="https://sp-edge.com/updates/18304">
 Global Affinity Business
 </a>
 ). Moreover, the period saw incumbents such as 
 <a href="https://sp-edge.com/companies/1658">
 Apple
 </a>
 foraying into the 
 <a href="https://sp-edge.com/updates/17372">
 Buy Now, Pay Later
 </a>
 industry and 
 <a href="https://sp-edge.com/companies/46376">
 JP Morgan
 </a>
 piloting a 
 <a href="https://sp-edge.com/updates/17299">
 biometrics payment
 </a>
 solution with plans for a larger roll-out in 2024.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 <h3>
 Partnerships: 
 </h3>
 <ul>
 <li>
 
 Enhancing existing product portfolio and value additions driving partnership activity: 
 Similar to product updates, partnership activity focused on launching new products or features that enhance the existing product portfolio of customers. In addition, incumbent activity remained strong, with notable partnerships between Microsoft, Goldman Sachs, Deloitte, and Cboe Global Markets to 
 <a href="https://finance.yahoo.com/news/goldman-microsoft-cboe-others-collaborate-152808338.html">
 develop a new blockchain network
 </a>
 for financial product smart contracts, and Wells Fargo, JP Morgan, and Bank of America developing a 
 <a href="https://www.cnbc.com/2023/01/23/bank-of-america-jpmorgan-and-other-banks-reportedly-team-up-on-digital-wallet-to-rival-apple-pay.html">
 new digital wallet
 </a>
 to rival Apple Pay.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 <h3>
 M&amp;A:
 </h3>
 <ul>
 <li>
 
 FinTech players actively seeking entry into youth money app market: 
 We counted 
 49 M&amp;A transactions
 within the FinTech Services vertical in 1H 2023. Most of these were primarily aimed at adding new products and services to complement their existing product portfolios. Furthermore, a notable trend emerged, with FinTech companies entering the youth money app and card market to capitalize on its significant growth potential.
 
 </li>
 </ul>
 </li>
 </ul>
 <hr/>
 <ul>
 <li>
 <h3>
 Outlook:
 </h3>
 <ul>
 <li>
 
 More consolidation expected as funding environment remains challenging: 
 As interest rates are expected to continue rising, access to funding may become more exclusive, favoring well-established and promising companies. Consequently, smaller, unprofitable companies may encounter challenges in raising funds, leading them to explore M&amp;A opportunities to survive.
 
 </li>
 <li>
 
 Crypto regulations to drive more adoption amongst retailers: 
 The implementation of more stringent regulations on the cryptocurrency industry will instill confidence among the public, encouraging greater adoption. Furthermore, the anticipation of additional regulations aimed at combating money laundering is likely to act as a deterrent against rug pulls and scams.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
</div>

Financial Services (Q3 2023): Funding recovers on the heels of Finastra’s record-breaking private credit deal

<div>
 
 XR: 
 We maintain a neutral outlook for the sector, amidst stable levels of funding compared with 2022. 
 
 
 MEP: 
 We maintain a negative outlook for the industry in the short term, despite improvements made by Meta to bolster user immersion on its platform.
 
</div>

<div>
 <h1>
 Key takeaways
 </h1>
 <ul>
 <li>
 
 Product updates
 
 <ul>
 <li>
 
 XR: 
 Eight devices were announced in Q2, three of which were from incumbents. The most prominent was Qualcomm&rsquo;s Snapdragon XR 2 Gen 2 chip meant to power virtual reality (VR) headsets, 
 providing a 2.5x performance boost over its predecessor. 
 From a software standpoint, 25 updates were recorded, with several players upgrading body-/hand-tracking features, including Meta, HTC, and Unity.&nbsp;
 
 </li>
 <li>
 
 MEP
 : There was an uptick in product updates (18 in Q3 vs. 11 in Q2), including 1) 
 Meta adding avatar legs to Horizon Worlds and expanding platform access to web browsers and smartphones
 and 2) Roblox&rsquo;s launch on Meta&rsquo;s Quest headsets and its addition of a GenAI assistant for world creation.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 Partnerships
 
 <ul>
 <li>
 
 XR:
 Q3 recorded 25 partnerships, primarily on customer collaborations (~56% of total). These consisted of making existing AR/VR solutions compatible with headsets&mdash;a shift away from the heavy product development focus in Q2 2023. A notable update was 
 Unity&rsquo;s launch of a beta program to develop apps for Apple&rsquo;s upcoming Vision Pro headset
 .
 
 </li>
 <li>
 
 MEP:
 30 brand collaborations were recorded for the quarter compared with 36 in Q2 2023. The launches primarily stemmed from media and entertainment companies (11), followed by consumer services firms (5). 
 Notable brands that launched virtual worlds on metaverse platforms include McDonald&rsquo;s, Walmart, The Coca-Cola Company, and Yum Brands.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 
 <ul>
 <li>
 
 M&amp;A
 
 <ul>
 <li>
 
 XR: 
 Q3 included 1) AR surgical navigation platform Augmedics acquiring digital health assets of bankrupt Surgalign and Holo Surgical, 2) AR/VR content creation agency VR Owl Group acquiring XR collaboration platform MeetinVR, and 3) Vection Technologies&rsquo; (AR remote assistance platform) acquisition of Invrsion for solutions for fashion, retail, consumer goods, and real estate.&nbsp;
 
 </li>
 <li>
 
 MEP: 
 There were two acquisitions, Yuga Labs&rsquo; acquisition of music metaverse platform Roar Studios and Roblox&rsquo;s acquisition of voice chat moderation startup Speechly.
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 Funding&nbsp;
 
 <ul>
 <li>
 
 XR: 
 Raised USD 215 million in 16 rounds, down 18% YoY and 28% QoQ. This was the sector&rsquo;s lowest level of funding since we initiated coverage of the hub in Q3 2021. Notable rounds included AR heads-up-display (HUD) manufacturer Envisics and GenAI-backed non-playable character creator Inworld AI raising USD 50 million each.&nbsp;
 
 </li>
 <li>
 
 MEP: 
 Six companies raised USD 45 million, down 89% YoY, but up 15% QoQ. A large portion of this came from work metaverse platform Allseated&rsquo;s USD 22 million round. The most common types of rounds consisted of debt financing and initial coin offerings (ICOs). 
 
 </li>
 </ul>
 </li>
 </ul>
 
 
 <ul>
 <li>
 
 Outlook
 
 <ul>
 <li>
 
 XR: We maintain a neutral outlook for the sector, amidst stable levels of funding compared with 2022.
 While Meta&rsquo;s Quest 3 and Apple&rsquo;s Vision Pro headset could spur activity in the sector, access to a wider consumer base could be limited in the short term. This is due in part to the complexities in developing budget-friendly XR devices that solve key pain points in terms of resolution, weight, and body tracking. 
 
 </li>
 <li>
 
 MEP: We maintain a negative outlook for the industry in the short term, 
 despite improvements made by Meta to bolster user immersion on its platform.
 
 This is due to the significant gap between current tech capabilities and the vision for the metaverse to be a &ldquo;photorealistic interconnected digital ecosystem.&rdquo; However, in the medium to long term, new initiatives by global firms and the EU, such as its initiative on Web 4.0 and virtual worlds, offer hope for the future and may spur developments. 
 
 </li>
 </ul>
 </li>
 </ul>
 
 
</div>

XR and MEP (Q3 2023): Product improvements continue despite stagnant funding

<div>
 <ul>
 <li>
 
 Mega investment deals constitute 75% of all funding amidst a decline in funding volumes
 
 </li>
 <li>
 
 Regulators enforce stricter laws on crypto exchanges and issuers to improve consumer protection and adoption
 
 </li>
 <li>
 
 Product launches centered around complementary services and diversifying business models
 
 </li>
 </ul>
 
 
</div>

In 1H 2023, the FinTech Services sector saw a significant decline in funding volumes, but there were 20 mega deals that raised over USD 10 billion. Stripe secured the largest amount of funding at USD 6.5 billion. Regulations for cryptocurrency exchanges and digital token issuers were being finalized, with new laws aimed at regulating the industry. There were numerous product launches focused on complementing existing offerings and creating additional revenue streams. Partnerships were formed to enhance product portfolios, and there were several M&A transactions, with a trend of FinTech companies entering the youth money app and card market. The funding environment is expected to remain challenging, leading to more consolidation, and stricter regulations may drive adoption among retailers.

EDGE Insights