For much of the past two decades, Southeast Asia’s growth has been supported by relatively predictable energy costs. While this came with higher carbon intensity than the rest of the world, attention to shifting the energy mix has ebbed and flowed alongside the need to sustain growth through low energy costs. With the current Iran war threatening energy and food security, the implications extend beyond energy markets into inflation, food systems, and capital allocation.
As Earth Day approaches, the conversation is moving beyond sustainability toward economic resilience.
Recent geopolitical tensions, including the risk of prolonged conflict involving Iran, have reinforced this shift. The impact is not limited to oil prices, feeding through to broader economic conditions—from rising input costs to increased fiscal pressure across emerging markets. Indonesia, for example, initially allocated around US$22 billion for 2026 energy subsidies, but rising pressures have required an additional US$6 billion to maintain current fuel prices. This is straining a fiscal position already approaching the 3% legal deficit limit.
The Asian Development Bank estimates that a sustained Middle East conflict could reduce growth in developing Asia while pushing inflation higher. At the same time, the International Monetary Fund (IMF) projects a near 20 percent increase in global energy prices in 2026.
For Southeast Asia, where several economies remain structurally dependent on imported fossil fuels, these dynamics are becoming more visible—and more consequential for economic stability.
Energy dependence as a structural vulnerability
Indonesia, despite its history as an energy producer, now faces a widening gap between domestic oil production and consumption. The Philippines remains highly dependent on imported fuels, with fossil fuel imports accounting for around 6.1 percent of GDP and over half of the total energy supply.
The result is a recurring pattern: external shocks translate into higher domestic energy costs, feeding into inflation and reducing economic flexibility. Governments often respond through subsidies or price interventions, but these measures carry fiscal costs and are difficult to sustain.
In effect, the region is absorbing energy volatility through both higher import bills and fiscal responses. What was once cyclical is becoming increasingly structural.
From energy markets to food systems
The current conflict has also highlighted the link between energy and food systems.
Fertilizer prices have surged by up to 50 percent, driven by disruptions to shipping and production. Countries such as Indonesia and the Philippines rely heavily on imported fertilizers, exposing agricultural systems to supply shocks and price volatility.
The consequences extend beyond fuel. Rising input costs affect agricultural productivity, food prices, and food security—particularly in a region where smallholder farmers remain central to the system and are already under pressure from climate change.
This convergence is reshaping how energy policy and climate transition are understood. The discussion is no longer limited to emissions or sustainability targets, but increasingly tied to economic resilience and stability.
A transition is underway—but not yet aligned with risk
There are clear signs that Southeast Asia is moving toward a more diversified energy mix.
Clean energy investment in the region reached US$47 billion in 2025, up from US$30 billion a decade earlier, and now accounts for nearly half of total energy investment. Governments are setting more ambitious renewable targets, and private capital is becoming more active.
However, legacy systems remain. Coal continues to play a central role in power generation, with substantial capital committed to long-lived assets, creating inertia that slows the pace of transition.
The gap between rising risk and the pace of change is becoming more apparent, and closing it will require not only capital but consistent execution across the energy system.
Execution at the company level
The transition is increasingly defined by execution on the ground.
In Indonesia, on the renewable energy front, Xurya has focused on enabling adoption within the commercial and industrial segment by removing upfront cost barriers through a zero-capex rooftop solar model. By the end of 2025, the company had delivered more than 300 projects and secured over 200 MWp of capacity, with expansion into hybrid and off-grid systems reflecting demand for reliable and cost-efficient energy.
Electric mobility is also gaining traction. The shift from internal combustion engines to EVs offers improved total cost of ownership while reducing emissions and long-term subsidy burdens.
Across the ecosystem, companies are building the infrastructure required to support this transition. In Indonesia, Otoklix provides maintenance and repair services for EV brands such as VinFast and Geely, while logistics player Kargo has begun deploying EV trucks, with a long-term target of transitioning its fleet fully to electric.
According to S&P Global Energy, virgin plastic prices have spiked since the breakout of the Iran war, improving the competitiveness of recycled materials. Waste4Change operates across the waste value chain—from collection and sorting to recycling—helping mitigate cost pressures while supporting resource recovery. Over the past decade, the company has collected nearly 65 million kilograms of waste and recycled more than 14 million kilograms of materials, reflecting demand for scalable solutions addressing both environmental and operational challenges.
These examples reflect a broader shift: climate-related solutions in Southeast Asia are moving beyond early-stage adoption toward more established, infrastructure-like business models that address real economic constraints.
Reframing the role of climate investment
The implications for capital allocation are becoming clearer.
Decarbonizing power systems across major Asian economies, including Indonesia, Vietnam, and the Philippines, will require an estimated US$9 trillion in investment over the next two decades.
Diversified renewable energy systems, supported by storage and grid development, can reduce reliance on imported fuels and mitigate exposure to global price volatility. In this sense, the transition is not only an environmental objective but a structural adjustment toward greater resilience.
For investors, this reframes climate from a thematic allocation into a core component of risk assessment. In markets where external dependencies are high, energy and resource systems increasingly influence long-term returns.
A narrowing window for capital
Southeast Asia is entering a period where external shocks are becoming more frequent and interconnected.
Energy volatility, supply chain exposure, and food system pressures are reinforcing each other, creating a more complex operating environment for governments and businesses.
At the same time, the region has significant renewable potential, improving policy frameworks, and a growing ecosystem of companies capable of executing at scale.
The transition toward more resilient energy and resource systems is already underway. The question is whether it can progress at a pace that matches the risks.
For investors, this is no longer a distant consideration. It is now an active component of how capital is evaluated and deployed across the region.
Helen Wong is a Managing Partner at ACV Capital and a seasoned venture capitalist with over two decades of experience spanning Silicon Valley, China, and Southeast Asia. A Forbes Asia Top 50 Over 50 honoree, she has backed and guided multiple high-growth technology companies, including Akulaku, Tudou, and Mobike, through IPOs and acquisitions. Helen is a Kauffman Fellow and holds degrees from Oxford and INSEAD.
ACV Capital is a private equity investment firm backing high-growth businesses across Southeast Asia. With offices across Southeast Asia and headquartered in Indonesia, and a global network of partners, we help scale high-potential companies into market leaders. Our firm manages over US$500 million across five funds and, over the past eight years, has invested in more than 100 companies across Southeast Asia.
Xurya and Waste4Change are some of our Climate & Sustainability portfolio companies. We are actively looking to invest in renewable energy, energy efficiency, electric mobility, climate-smart agriculture, and waste & circularity.
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