Across Southeast Asia, key innovators are working at the intersection of this generation’s two key challenges: climate change and public health.
While there are many financing interests in the climate and health nexus, many startups are struggling to survive beyond the pilot phase, trapped in what experts call the “missing middle” due to a lack of investor confidence to create scalable innovation pipelines.
Southeast Asia’s startups at the heart of climate action
The “missing middle” explained
Across Asia, there’s no shortage of support for early ideas. Philanthropic grants and pilot funding are relatively easy to access, especially when projects show clear social impact. However, real challenges emerge once these startups seek between one to three million dollars to scale. At that point, they are often too large for small grants and too risky for commercial investors.
Development experts describe it as the “missing middle”; the gap where promising ventures get stuck, unable to move from pilot to growth stage. And in the case of climate and health, this problem is particularly severe.
The reason? These ventures sit at the intersection of two sectors that investors don’t usually combine.
Climate funds tend to look for infrastructure, renewables, or carbon projects; health investors, on the other hand, zero in on hospitals, biotech, or pharmaceuticals. Startups that try to do both can appear complicated or “unscalable”, even if their long-term benefits are clear.
What is the hesitancy?
Investor caution stems from both perception and structure. Dual-impact ventures often require longer timelines to show measurable outcomes, especially in health indicators that rely on population-level data. This makes them less appealing to investors who prefer shorter-term returns.
In addition, there is a prevailing belief that climate-health innovations are closer to public goods than commercial products. Due to this, it is often chalked up to the responsibility of governments or philanthropic funders.
Meanwhile, private investors often look into prioritising sectors and segments that outline a clear monetisation pathway, particularly in sectors such as renewable energy, enterprise technology, and logistics.
Another challenge lies in the regulatory landscape. Many climate-health startups operate in highly regulated environments where product approvals, clinical validation, or alignment with national health systems are mandatory. This creates uncertainty, particularly for investors unfamiliar with policy-linked innovation or the regional diversity of Southeast Asia’s healthcare systems.
Alternative capital models: Blended and catalytic approaches
In order to help bridge this gap, financial institutions, philanthropic investors, and impact funds are experimenting with blended finance and catalytic capital. These mechanisms combine concessional funding, which accepts below-market returns, with commercial investment to make early-stage ventures more investable.
Blended structures such as impact bonds or first-loss guarantees can reduce perceived risk and encourage participation from private investors. This, in return, helps startups demonstrate viability in smaller or underserved markets before expanding regionally.
While the application of blended financing has been utilised in other sectors, its potential within climate and health innovation remains largely untapped. The opportunity lies in structuring regional funds that bring together a mix of philanthropic, corporate, and public investors, each contributing different levels of risk tolerance.
Ultimately, this would allow early-stage ventures to access more predictable financing while sending a signal of confidence to mainstream capital markets.
Public policy and ecosystem players: Key drivers in driving the agenda
Public-private partnerships play a pivotal role in helping the growth of climate-health innovation. With robust public policies sending the right signals through procurement, funding, or regulation, startups and investors will ultimately gain the confidence to act.
Simple moves like introducing targeted grants or including health resilience in climate frameworks can open new space for ideas to take root.
In Southeast Asia, for instance, regional efforts around climate adaptation could go further by carving out room for projects that directly improve public health. Global institutions can also play a part by making sure their climate adaptation funds include clear goals around health outcomes, rather than focusing only on big infrastructure projects.
There’s also potential in new mechanisms like carbon markets. If national frameworks start recognising the health benefits of cleaner air or lower pollution, startups could earn from verified impact credits. But to make this work, countries would need strong rules and clear ways to measure progress.
The private sector has an equally important role to play in this effort. Funds from corporate sustainability can be funnelled into financing early-stage solutions; universities, incubators and accelerators can build talent and provide technical guidance and expertise. When public policy, research, and investment move in the same direction, innovation stands a better chance of scaling where it matters most.
A Roadmap for 2026: Structuring funds and de-risking innovation
Fixing the missing-middle gap won’t happen through one grand solution. It will take a mix of small, practical moves that slowly shift how money and policy work together. Southeast Asia already has the ingredients: capital, talent, and urgency.
One starting point is to establish funds that reflect how climate and health overlap. Right now, investors are mostly boxed in by categories: climate on one side and healthcare on the other; startups that sit in between often get left behind..
If public institutions, development banks, corporate foundations, and donors pooled their resources into one blended pot, it could give these ventures the kind of patient, flexible capital they need to move from pilot to scale.
The second piece is to agree on how to measure success. It sounds obvious, but every funder today seems to track impact differently. Some count emissions avoided, others focus on improving lives. A common set of indicators, like reduced hospital visits, cleaner air, or fewer heat-related illnesses, would make conversations between innovators and investors a lot more straightforward.
Public agencies can make a real difference by helping shoulder the risk. Co-investment programmes, credit guarantees, or even targeted procurement can show that climate-health innovation is worth betting on.
These are not novel ideas, but blending them together would send a strong signal of readiness. It’s an emerging market with real commercial and social value, and one that could define Southeast Asia’s next phase of sustainable growth
Turning the nexus into a growth engine
The intersection of climate and health is one of the most important frontiers for sustainable growth in Southeast Asia. As the region faces rising risks from extreme weather, infectious diseases, and air pollution, the economic cost of inaction is becoming harder to ignore.
Climate-linked health impacts already threaten productivity, increase healthcare expenditure, and deepen inequality. Investing in solutions that address both climate and health challenges is not only about building resilience but also about creating value.
Startups working in this space represent a new generation of innovators who combine technology, local insight, and social purpose. Their success depends on whether the region can design financing mechanisms that meet them halfway.
The missing middle will not close through grants or goodwill alone. It requires structural reforms in how capital is mobilised, measured, and rewarded. With greater collaboration between policymakers, investors, and ecosystem builders, Southeast Asia has an opportunity to turn its climate-health nexus from a funding challenge into a regional growth engine.