Private green investments in South-east Asia rise 43% to US$8 billion in 2024: report

[SINGAPORE] South-east Asia managed to attract US$8 billion in green investments from the private sector in 2024, up 43 per cent from the previous year, according to a joint report by Bain & Company and Temasek released on Tuesday (May 6).

About 70 per cent of these investments came from foreign investors. This was a stark contrast from the previous year, when only 30 per cent were from foreign sources.

Out of the six South-east Asian markets studied in the report – which was also authored by Google, Standard Chartered, as well as Temasek-backed decarbonisation investment platform GenZero – it found that Malaysia and Singapore took the lion’s share of the US$8 billion.

Green investment into Malaysia increased by 124 per cent to US$2.3 billion, making up about 29 per cent of the total sum of investments. Green fund flows into Singapore accounted for 33 per cent, as they jumped 194 per cent from the previous year to US$2.7 billion.

The other four markets – the Philippines, Thailand, Indonesia and Vietnam – saw a reduction in green investments.

Indonesia suffered the worst decline, dropping 22 per cent to US$1.2 billion. This was followed by Vietnam, which had a 19 per cent reduction to US$161 million.

A NEWSLETTER FOR YOU

Friday, 12.30 pm

ESG Insights

An exclusive weekly report on the latest environmental, social and governance issues.

Green investments into the Philippines went down by 12 per cent to US$1.3 billion, while Thailand experienced a drop of 10 per cent to US$355 million.

When analysing the allocation of green investments across different project types, about two-thirds went into clean power projects, particularly solar which saw capital flows doubling from the previous year and accounted for 21 per cent of the total green investments in 2024.

Investments into industrial waste management, which made up 9 per cent of investments, also increased, primarily driven by water treatment and recycling projects.

In contrast, electric vehicles (EVs) and agricultural productivity experienced a decline in investments.

Despite the jump in green investments, the report noted that there is still a funding gap of about US$50 billion for these six Asean markets to meet their stated climate pledges by 2030.

To make good on these promises by 2030, South-east Asia has to reduce its emissions by another 600 million tonnes of carbon dioxide equivalent (tCO2e).

Solutions to accelerate the green transition

To accelerate the clean energy transition, the report advocates for a systems-based approach that involves identifying systemic barriers, finding high-impact solutions and prioritising those with the highest ability to drive lasting change. 

This is because the region’s green economy is a set of linked systems, where changes in one area can affect others.

The report identified three systems-level solutions that are important for South-east Asia to decarbonise: a sustainable bio-economy, an EV ecosystem, as well as growing its renewable energy along with developing the Asean Power Grid.

A sustainable bio-economy would involve leveraging South-east Asia’s natural capital for economic benefit and carbon reduction through sustainable agriculture, expanding nature-based solutions, and scaling bio-waste utilisation.

EV adoption could be accelerated by implementing buyer incentives, developing the necessary infrastructure as well as its regional supply chains.

Investing in grid infrastructure can help eliminate a critical bottleneck in scaling up renewable power generation, with long-term positive impacts on regional energy security and affordability.

The report estimates that such an approach could help these Asean economies grow by US$120 billion by 2030, potentially bring about 900,000 green economy jobs, and close the emissions gap of 600 million tCO2e by half to 300 million tCO2e.

It also noted that these three systems-based solutions may also attract up to US$55 billion in annual investments by 2030, which could potentially serve to shore up foreign direct investments during an economic slowdown.

Climate and transition finance, carbon markets, as well as green artificial intelligence (AI) have also been identified in the report as key enabling solutions.

Growing the sum of sustainable and transition financing requires expanding access to capital through innovative financing models, regional financing frameworks and enhanced risk-sharing mechanisms.

To grow the region’s carbon markets, the report said there was a need to establish domestic and regionally connected carbon markets, put in place stronger carbon policies to drive demand, as well as increase the supply of large-scale verifiable credit projects.

As for green AI, it involves advancing AI-driven sustainability solutions while ensuring sustainable data-centre growth.