Private green investments in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam - collectively the "Southeast Asia-6" - spiked 43% y-o-y to US$8 billion in 2024, with Malaysia and Singapore contributing over 60% of deals.
Power continues to hold a two-thirds share of green investments in the region with increase in deal sizes, according to the 6th edition of the Southeast Asia's Green Economy report by Bain & Company, GenZero, Google, Standard Chartered and Temasek, released May 6.
Within the sector, solar witnessed the biggest jump (100% y-o-y) in investments while waste management deals increased 60% y-o-y, driven by water treatment and recycling projects.
Malaysian deals doubled within building investments, such as data centres, along with a fourfold increase in investments into solar power systems.
Private deals in the country into green hydrogen also totalled US$400 million last year, up from zero in 2023. The particular project focuses on green hydrogen production using solar power technology, according to the report's authors.
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Corporations continue to strongly lead green investments in Southeast Asia, as with India and South Korea. Climate funds' and infrastructure funds' interest in the region also grew significantly, say authors, by four times and 14 times respectively.
Foreign investments from outside of Asia Pacific (APAC) into SEA-6's green economy more than tripled in 2024 while foreign investments from APAC doubled. SEA-6 domestic investment fell by 40% but these investors were active in green growth in the rest of APAC, say the authors.
Green investments have been growing since 2016; however, there remains a US$50 billion funding gap to meet 2030 accepted pledges. Southeast Asia needs innovative financing to close this funding gap and accelerate the green economy, say authors.
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Four recommendations
Blended finance could help the region close this funding gap. This financing structure combines different types of funding from sources like governments, philanthropists and the private sector. Proponents believe bringing together money with varying risk levels helps increase private sector investment in sustainable development.
Within Southeast Asia, blended finance is growing but is constrained by small deal sizes, red tape and investor mismatch, say the authors.
"Favourable policies, talent development and public-private partnerships are necessary to move the needle. Innovative financing mechanisms such as offtake-based financing and infrastructure funds are gaining traction, but success would depend on developing standardised repeatable models to enable scale," they add.
The report outlines four recommendations to scale blended finance in Southeast Asia.
Firstly, countries should set up supportive policies that promote low-carbon projects over high-emission options. Indonesia, for example, is mandating international flights use at least 1% sustainable aviation fuel in their fuel blend from 2027. Singapore, meanwhile, has announced its plan to import 6 gigawatts of low-carbon electricity by 2035.
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Secondly, nations should build proven repeatable models by creating standards for using catalytic capital. The Asean Taxonomy for Sustainable Finance, for example, launched a sustainable investment framework for catalytic capital and high-impact projects in April 2024.
Thirdly, Southeast Asian countries should secure a regional talent pool by investing in talent, capacity and dedicated green finance expertise. Indonesia, for one, signed an agreement with Stanford University in March 2024 to establish a sustainability research centre in Nusantara, Indonesia's future capital city.
Finally, nations should facilitate public-private cooperation and bridge trust and knowledge gaps. Some examples include the Asian Development Bank's US$30 million loan for 35 sustainable infrastructure projects in the Philippines from December 2024 and Singapore's multi-sector Singapore Sustainable Finance Association and government-backed blended finance initiative Financing Asia's Transition Partnership.
"Advancing the green economy using a systems-based approach needs concerted effort from all stakeholders - corporates, investors, and governments," say the authors. "Decarbonisation in Southeast Asia must now deliver practical outcomes beyond targets. It is no longer a cost driver but a strategic growth lever, with both environmental and economic benefits for the future of the region."
Window for action
APAC and Southeast Asia have critical roles to play in global decarbonisation, say the authors. APAC contributes half of the world's greenhouse gas emissions, while Southeast Asia accounts for 7.5%. Both regions are equally reliant on fossil fuels to meet power demands.
Based on current trajectories, most APAC nations are falling short of their 2030 targets, and the emissions gap for the two regions is expected to widen even further by 2040 and 2050. "Southeast Asia is especially vulnerable as it has not been able to bend its emissions curve yet. Interventions are needed urgently to shift that trajectory to meet targets," they add.
"With just five years to 2030, our window for action to avoid the worst effects of climate change is rapidly closing," says Franziska Zimmermann, managing director, sustainability, Temasek. "We need to increase the momentum and focus on pragmatic solutions with near-term impact. Stakeholders in this region have an opportunity to drive transformative, systems-level change that can balance energy security, sustainability and economic growth."
Infographics: Bain & Company, GenZero, Google, Standard Chartered and Temasek
