When there’s a will, there’s a way: Asean’s future as a sustainability leader
Rising energy demand and intensifying climate change call for urgent acceleration of renewable energy production and capital funding
AS THE world’s fourth-largest energy consumer and home to one-tenth of the global population, Asean has an important role to play in global efforts to tackle climate change.
The region has made commendable strides. The Southeast Asia’s Green Economy 2024 report showed that Asean had a 20 per cent rise in green investments in 2023, and eight of its 10 member nations have set net-zero targets. Among them, Singapore and Vietnam have made the most progress in reducing greenhouse gas emissions over the past year.
Slowing down efforts to decarbonise is not an option: the International Energy Agency reported that energy demand in Asean has increased by 3 per cent 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.
The stakes are high, as the region faces the real and present effects of climate change.
As a bloc, Asean’s diverse markets have different priorities and strengths. But what they have in common are intent and determination – while acknowledging the need to balance growth and the costs of a green and sustainable transition.
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For example, Singapore is a pioneer in innovative green financing; Vietnam’s government is making a clear push towards renewable energy; Indonesia is seeking to retire coal-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 US$2 trillion in green investments regionally.
Riding Asean’s momentum 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 wish to highlight are innovative finance mechanisms and regional collaboration.
Blending innovation and financing for a greener future
Asean needs an additional US$1.5 trillion to support its green transition. Scaling innovative finance mechanisms – such as blended finance, carbon credits and project financing – will be crucial to ensure that investors have sufficient incentives and business cases to fund.
Take the project financing for the Phu Yen solar power plant in Vietnam as an example. Not only is the plant helping to significantly reduce the country’s emissions, but it is 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 favour of social and environmental impacts aligned with the Sustainable Development Goals – to de-risk projects and reduce costs of capital, attracting more private 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 US$15.5 billion to support Vietnam’s energy transition and US$20 billion to help Indonesia phase out coal energy and invest in renewable energy infrastructure.
By scaling concessional capital and other enablers, up to US$20 billion for blended finance per year could become available for decarbonisation 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 to encompass different forms of catalytic capital, matching investments with appropriate projects and attracting 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 decarbonisation 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 (MAS) is mobilising up to US$5 billion as part of Financing Asia’s Transition Partnership, or FAST-P, a regional blended finance platform that will contribute significantly to Asean’s sustainability ambitions.
Climate action as a 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 efforts, across Asean and the rest of the world, and between the public and private sectors.
In this equation, the role of financial institutions is key.
As the only international bank with a presence across all Asean markets, Standard Chartered plays an important role in facilitating capital to support corporate emissions-reduction efforts. We’re committed to mobilising US$300 billion in sustainable finance by 2030, and directing capital and climate solutions to where they are needed most.
Our long-established relationships with governments, companies and investors mean we also add value by bringing them together.
Whether helping to scale the carbon market through our founding partnership in Climate Impact X (a Singapore-based global marketplace, exchange and auction house for trusted carbon credits), or our participation in MAS’ Transition Credits Coalition (which aims to expedite the phase-out of coal-fired power plants), we continue to work closely with our partners to help finance the green transition and boost climate resilience.
For collaborative projects such as these to reach their potential, a unified approach is crucial. This would encompass standards, incentives and disclosures that all markets in Asean, and globally, can adopt and follow.
Stakeholders across Asean understand the importance of the climate agenda and are planning commitments and investments to reach a sustainable future. But at the same time, we must recognise the challenges ahead.
Acting now and collaborating to build momentum will give us our best chance at achieving our climate goals.
When there’s a will there’s a way, and across Asean, there is no shortage of will. I am confident that it has a bright future as a sustainability leader.
The writer is CEO, Singapore and Asean, Standard Chartered
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