As the world’s fourth-largest energy consumer and home to one-tenth of the global population, the Association of Southeast Asian Nations (Asean) has an important role to play in global efforts to tackle climate change.
The region has made commendable strides. According to the Southeast Asia’s Green Economy 2024 report, Asean saw a 20 percent rise in green investments in 2023, and eight of the 10 Asean nations have set net zero targets, with Singapore and Vietnam making the most progress on greenhouse gas emissions reduction over the past year.
Slowing down efforts to decarbonize is not an option: the International Energy Agency reports that energy demand in Asean has increased by 3 percent annually over the past 20 years,and will continue to do so until 2030.
To accelerate the net zero agenda, renewable energy production must catch up and more capital is needed to fund the energy transition.Today, the stakes are high, as the region faces the real and present effects of climatechange.
As a bloc, each of Asean’s diverse markets has different priorities and strengths. But what these markets have in common are intent and determination — while acknowledging the need to balance growth and the costs of a green and sustainable transition.
For example, Singapore is a pioneer in innovative green financing; Vietnam’s government is making a clear push towards renewable energt; Indonesia is seeking to retirecoal-fired power plants early;and Malaysia is guiding financial sector players to develop taxonomies and progress on climate risk initiatives. In addition, several countries are discussing a potential cross-border green energy grid.
With such purpose and intent, the rewards from regional cooperation could be substantial. Up to six million new jobs could be created by 2030, with up to $2 trillion in green investments regionally.
Riding on Asean’s wave of momentum on climate action is key. According to the Southeast Asia’s Green Economy 2024 report developed by Standard Chartered in partnership with Bain & Company, GenZero and Temasek, there are five accelerators that can help Asean expedite its climate action progress. The two I would like to highlight are innovative finance mechanisms, and regional collaboration.
GREENER FUTURE
Asean needs an additional $1.5 trillion to support its transition. Scaling innovative finance mechanisms like blended finance, carbon credits and project financing will be crucial, to ensure that investors have sufficient incentives and business cases to fund.
Take project finance funding forthe Phu Yen solar power plant in Vietnam.Not onlywill the plant help to significantly reduce Vietnam’s emissions, but it’s also one of the largest solar powered facilities in Asean and Asia’s first green B loan certified by the Climate Bonds Initiative.
Blended finance is also set to play an important role. This leverages catalytic capital— which carries slightly lower financial returns in favor of social and environmental impacts aligned with the Sustainable Development Goals (SDGs)— to de-risk projects and reduce costs of capital, attracting moreprivate sector funding.
Take for example, the Just Energy Transition Partnership (JETP) for fossil fuel phase-outs and renewable energy investments. Alongside our JETP partners, which include governments and monetary authorities, as well as fellow private sector financiers, we have committed a combined $15.5 billiion to support Vietnam’s energy transition and $20 billion to help Indonesia phase out coal energy and invest in renewable energy infrastructure.
By scaling concessional capital and other enablers, up to $20 billion for blended financeper year could become available for decarbonization opportunities in Asean, if a common approach is developed for the region.
The priority now is to scale blended finance beyond single projects. To replicate blended finance structures, a framework needs to be developed toencompasses different forms of catalytic capital, matching investments with appropriate projects and to attract commercial capital in the right way. This ecosystem would include the private and public sectors, supported by efficient long-term policies and regulations aimed at simplifying the decarbonization agenda for investors.
Leading the charge is Singapore, which is host to one of Asean’s leading blended finance initiatives. The Monetary Authority of Singapore is mobilizing up to $5 billion as part of a regional blended finance initiative known as FAST-P (Financing Asia’s Transition Partnership),which will contribute significantly to ASEAN’s sustainability ambitions.
JOINT EFFORT
Beyond its financial contribution, Singapore is also well-suited as a super-connector between Asean and the world, given its strengths in long-term planning and consensus building.
Singapore’s example shows that collaboration is vital: building resilience to climate change goes beyond siloed action. There’s more to be achieved from collective effort, across Asean and the rest of the world, and between the public and private sectors.
