Green investments in Southeast Asia dipped 7% y-o-y to US$5.2 billion ($7.03 billion) in 2022, extending a downward trend from previous years, according to a report by Bain & Company, Temasek, GenZero and Amazon Web Services (AWS) released on June 6.
While foreign investors continued to account for most of the region’s green investments, the nature of foreign investment in the Southeast Asia green economy is shifting, reads the “Southeast Asia’s Green Economy 2023 Report: Cracking the code” report.
In 2022, foreign investment from outside of Southeast Asia fell by over 50% compared to 2021 and 2020.
Meanwhile, intraregional investments doubled. Over half of the green investments in the region go towards Indonesia and Singapore, which have been steadily growing over the last couple of years.
Renewable energy continued to be investors’ favourite theme as the share of renewables investments remained stable at 70%-75%.
“Southeast Asian governments need to focus first on proven solutions to balance rising energy demand while reducing carbon emissions. The everything, everywhere all at once mantra is not going to get the job done nor build the clarity needed to scale investment and impact,” says Dale Hardcastle, global head of carbon markets at Bain & Company. “Regulations and investment should be focused on the deployment of proven and profitable technologies that are here today and can have impact, while we lay the track to take on hard-to-abate industries with new technologies and innovation in the longer term.”
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Governments across Southeast Asia have set climate ambitions, but not enough action has been taken to meet nationally determined contribution (NDC) targets by 2030, says the report’s authors.
The region will need to reduce greenhouse gas emissions by 33% from business-as-usual levels in 2030. This refers to projected emissions levels should there be no significant change in technology, economics or policies such that historical trends continue.
Public and private sectors across the region must harness a collective will to challenge the status quo, say the report’s authors. Since the publication of the 2022 report, four countries — Indonesia, Singapore, Thailand, and Vietnam — have committed to material emission reduction targets by 2030.
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Eight out of 10 Southeast Asian countries have set carbon neutrality goals, while seven of them are either considering or have implemented carbon pricing mechanisms. The number of Southeast Asian businesses signing on to Science-Based Targets Initiative (SBTi) commitments have quadrupled to 109 in 2022.
Potential in nature and energy sectors
Southeast Asia faces a unique set of challenges, making decarbonisation particularly difficult. Collectively, the region’s largest challenges are high dependency on fossil fuels and reliance on international funding.
“Adapting economies to change in the face of an emerging middle class that is driving energy demand, while simultaneously reducing carbon emissions, is an enormous task for governments and leaders in the region,” say the report’s authors.
The report highlighted that the nature and energy sectors, which contribute 85% of Southeast Asia’s total emissions reduction targets, will be most critical to the region meeting its NDC goals.
The energy sector will need to streamline its permit process, accelerate grid modernisation efforts to reduce congestion and curtailment risks and increase financial incentives for renewables to accelerate the energy transition.
Nature-based solutions (NBS), such as protecting intact lands, sustainable agriculture and restoration of deforested lands, present significant abatement potential for the region. However, ineffective forest conservation policy enforcement, nascent carbon markets and insufficient smallholder financing are key barriers, they add.
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Southeast Asia presents significant opportunities for green investments, says Frederick Teo, chief executive officer of GenZero. “It is home to some of the world’s most dynamic economies, with a growing number of green initiatives and innovative solutions being developed in the region. Regional cooperation is key to unlocking the full potential of an effective green economy by crowding in necessary capital and expertise to fully develop opportunities in nature, technology, and carbon markets. This will help advance the regional transition to a net-zero economy.”
Green jobs
According to the report’s authors, the green economy in Southeast Asia could create several economic opportunities.
Between five and six million green jobs in areas of planning, construction, operations and maintenance of clean energy infrastructure as well as manufacturing could be created in the decade ending 2030, a result of sustainability investments in Asean-6, or Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.
Taking collective action could result in up to US$2 trillion of new investments to meet NDC targets in Southeast Asia, they add.
The region could be poised for revenue driven from renewables exports by deploying cleaner energy sources and low-carbon materials to meet growing customer demand for greener goods.
Green business operations carried out in rural and suburban areas could also help provide better livelihoods and knowledge transfer to local communities while developing the local economy.
Cloud technology can offer the innovation prowess needed to develop sustainability solutions to help Southeast Asia meet its ambitious climate goals, says Ken Haig, head of energy and environmental policy, Asia Pacific and Japan, at Amazon Web Services.
“From climate impact reporting, and air quality monitoring, to the optimisation of renewable energy resources, and adapting agricultural practices to changing climates — so much has been done and is still possible with cloud,” says Haig. “Organisations in the region that move IT workloads from on-premises data centres to cloud can lower their carbon footprint by nearly 80% due to the highly energy efficient cloud data centres. Easier access to emerging technologies such as data analytics, artificial intelligence and machine learning through cloud will play an important role in helping Southeast Asia accelerate its sustainability transition.”
