Green investment in Southeast Asia (SEA) fell 7 percent to $5.2 billion in 2022 from $5.6 billion in 2021, continuing a downward trend from previous years. a report showed Tuesday.
According to Southeast Asia’s Green Economy 2023 Report: Cracking the code published by Bain & Company, Temasek, GenZero and Amazon Web Services (AWS), governments across SEA have set climate ambitions, but not enough action has been taken to meet nationally determined contribution (NDC) targets by 2030.
The report found that to achieve its NDC or emissions reduction commitments and unlock the green economy potential, the region will need to reduce greenhouse gas emissions by 33 percent from business-as-usual levels in 2030.
It said that public and private sectors across SEA must harness a collective will to challenge the status quo.
Since the publication of the 2022 report, four SEA countries – Indonesia, Singapore, Thailand, and Vietnam – have committed to material emission reduction targets by 2030.
Eight out of ten SEA countries have set carbon neutrality goals, while seven of them are either considering or have implemented carbon pricing mechanisms.
The number of SEA businesses signing on to Science-Based Targets Initiative commitments have quadrupled to 109 in 2022.
The report also showed foreign investors continued to account for most of the region’s green investments, and the nature of foreign investment in the SEA green economy is shifting.
In 2022, foreign investment from outside of SEA had fallen by over 50 percent 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’ favorite theme as the share of renewables investments remained stable at 70 percent to 75 percent.
“SEA 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,” said Dale Hardcastle, Global Head of Carbon Markets and Director of Global Sustainability Innovation Center at Bain & Company, based in Singapore.
According to him, regulations and investment should be focused on the deployment of proven and profitable technologies that are here today and can have impact, while they lay the track to take on hard-to-abate industries with new technologies and innovation in the longer term.
The report also said SEA faces a unique set of challenges, making decarbonization 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.
The report noted that SEA will need to double down on its decarbonization efforts to achieve the dual purpose of economic growth and decarbonization.
“SEA has immense potential to contribute to global decarbonization,
“But we need a holistic approach and a concerted effort across all stakeholders including governments, businesses, academia, and individuals,” said Wai Hoong Fock, Head, Southeast Asia, Temasek.
He said at Temasek, the firm invests for the long term to help create a better future for generations to come.
“We believe there are immense opportunities to catalyze sustainable growth and innovation, and also to foster resilience in our economies, communities, and businesses in the transition towards net zero,” he added.
The report also highlighted that the nature and energy sectors, which contributes 85 percent of SEA’s total emissions reduction targets, will be most critical to the region meeting its NDC goals.
Despite abundant renewable energy resources, it said the slow approval and launch of infrastructure, lack of financial attractiveness, and regulatory uncertainty are holding back the region’s ability to fully realize its potential.
It said the energy sector will need to streamline its permit process, accelerate grid modernization efforts to reduce congestion and curtailment risks, and increase financial incentives for renewables to accelerate the energy transition.
According to the report, 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 NBS, and insufficient smallholder financing are key barriers.
To unlock nature’s untapped potential, it said countries in SEA need to build institutional capacity for conservation policy enforcement, incentivize the restoration and protection of natural ecosystems (e.g., forestlands,) and align domestic carbon project standards internationally.
“SEA presents significant opportunities for green investments,
“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,” said Frederick Teo, Chief Executive Officer of GenZero.
According to him, 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,” he added.
According to the report, the green economy in SEA 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, i.e., Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.
The report also highlighted that taking collective action could result in up to $2 trillion of new investments to meet NDC targets in SEA.
It said 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.
It said that 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 SEA meet its ambitious climate goals,
“From climate impact reporting, and air quality monitoring, to the optimization of renewable energy resources, and adapting agricultural practices to changing climates – so much has been done and is still possible with cloud,” said Ken Haig, Head of Energy and Environmental Policy, Asia Pacific and Japan, Amazon Web Services.
According to him, organizations in the region that move information technology (IT) workloads from on-premises data centers to cloud can lower their carbon footprint by nearly 80 percent due to the highly energy efficient cloud data centers.
“Easier access to emerging technologies such as data analytics, artificial intelligence, and machine learning through cloud will play an important role in helping SEA accelerate its sustainability transition,” he added.
The report said that in the near term, the region could focus on proven solutions that have both high carbon abatement potential and can be implemented in a short timeframe for maximum decarbonization impact.
Notably, lay the foundation with grid upgrades, energy efficiency and conservation measures; pilot financial innovation e.g., new incentives for NBS project development, mechanisms for managed phaseout of coal, and blended financing; enforce existing nature conservation policies and promote carbon markets.
Longer term, it said economies should consider initiatives to invest in today, but not at the expense of proven actions.
It said some of these solutions will deliver highest impact post-2030 when commercial viability increases, such as regional power grid infrastructure, NBS and carbon services workforce development, hydrogen and derivatives as energy sources, carbon capture, utilization and storage across all sectors.
It said governments could develop clear transition roadmaps, accelerate infrastructure development, unlock incentives, and enforce regulations to catalyze momentum.
It also said corporates must move beyond setting climate ambitions to set clear roadmaps and scale their emission reduction activities.
And finally, it said investors should facilitate more blended financing, assess existing fossil fuel assets while investing in enabling tech and human capital.
Ultimately, it said stakeholders across the public and private sectors must act collectively for SEA to meet both its economic and climate goals.