SINGAPORE – June 5, 2023 – Governments across Southeast Asia (SEA) have set climate ambitions, but not enough action has been taken to meet nationally determined contribution (NDC) targets by 2030, according to Southeast Asia’s Green Economy 2023 Report: Cracking the code, a report by Bain & Company, Temasek, GenZero and Amazon Web Services (AWS).

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% from business-as-usual* levels in 2030. 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 10 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.

However, green investments dipped 7% to USD 5.2 billion in 2022 compared to 2021 continuing a downward trend from previous years. While foreign investors continued to account for most of the region’s green investments, 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% 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 70-75%.

“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.

“Regulations and investment should be focused on the deployment of proven and profitable technologies that are here today and can have impact, while we lay the track to take on hard-to-abate industries with new technologies and innovation in the longer term.”

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. 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. At Temasek, we invest 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,” said Wai Hoong Fock, Head, Southeast Asia, Temasek.      

The report highlighted that the nature and energy sectors, which contributes 85% of SEA’s total emissions reduction targets, will be most critical to the region meeting its NDC goals.

Despite abundant renewable energy resources, 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. 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.

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, 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. 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,” said Frederick Teo, Chief Executive Officer of GenZero.

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. 

Taking collective action could result in up to USD 2 trillion of new investments to meet NDC targets in SEA. 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. 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. Organizations in the region that move IT workloads from on-premises data centers to cloud can lower their carbon footprint by nearly 80% 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,” said Ken Haig, Head of Energy and Environmental Policy, Asia Pacific and Japan, Amazon Web Services.

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, economies should consider initiatives to invest in today, but not at the expense of proven actions. 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.

Governments could develop clear transition roadmaps, accelerate infrastructure development, unlock incentives, and enforce regulations to catalyze momentum. Corporates must move beyond setting climate ambitions to set clear roadmaps and scale their emission reduction activities. And finally, investors should facilitate more blended financing, assess existing fossil fuel assets while investing in enabling tech and human capital.

Ultimately, stakeholders across the public and private sectors must act collectively for SEA to meet both its economic and climate goals.

*Business-as-usual levels refer to projected emissions levels should there be no significant change in technology, economics, or policies such that historical trends continue.

Editor's Note: For more information or interview requests please contact: Ann Lee, tel: +65 6228 2960, email: ann.lee@bain.com, Bain & Company

About Temasek

Temasek is an investment company with a net portfolio value of S$403 billion (US$297b) as at 31 March 2022. Headquartered in Singapore, we have 12 offices in 8 countries around the world. 

Our Purpose “So Every Generation Prospers” guides us to make a difference for today’s and future generations. Our Temasek Charter defines our three roles as an Investor, Institution and Steward, and shapes our ethos to do well, do right and do good. 

Sustainability is at the core of all that we do. We are committed to catalysing solutions to global challenges and activating capital – financial, human, social and natural – to bring about a better and more inclusive world for all.

For more information on Temasek, please visit www.temasek.com.sg.

About GenZero

GenZero is an investment platform company focused on accelerating decarbonisation globally. Founded by Temasek, we seek to deliver positive climate impact alongside long-term sustainable financial returns by investing in opportunities with the potential to be nurtured into impactful and scalable solutions.

Driven by a common purpose to decarbonise for future generations, we recognise the need for a holistic and integrated approach to achieve a net zero world. At GenZero, we adopt a flexible investment approach across three focus areas to drive climate impact: (i) nature-based solutions that help protect and restore our natural ecosystems while benefiting local communities and biodiversity; (ii) technology-based solutions that deliver deep decarbonisation impact; and (iii) carbon ecosystem enablers which refer to companies and solutions that support the development of an effective, efficient, and credible carbon ecosystem.

For more information on GenZero, visit www.genzero.co. 

About Amazon Web Services

Since 2006, Amazon Web Services has been the world’s most comprehensive and broadly adopted cloud. AWS has been continually expanding its services to support virtually any workload, and it now has more than 200 fully featured services for compute, storage, databases, networking, analytics, machine learning and artificial intelligence (AI), Internet of Things (IoT), mobile, security, hybrid, virtual and augmented reality (VR and AR), media, and application development, deployment, and management from 99 Availability Zones within 31 geographic regions, with announced plans for 15 more Availability Zones and five more AWS Regions in Canada, Israel, Malaysia, New Zealand, and Thailand. Millions of customers—including the fastest-growing startups, largest enterprises, and leading government agencies—trust AWS to power their infrastructure, become more agile, and lower costs.

To learn more about AWS, visit aws.amazon.com.