ASEAN currently lies at the crossroads that will impact the ecological future of not just the region but the world itself. If that sounds dramatic, that's because it is — ASEAN's 660 million-plus people make up nearly 10% of the world's population, and its use of fossil fuels has doubled between 2000 and 2019. Its energy mix is currently 80% oil, natural gas, and coal.

And yet, many would argue that Southeast Asia is playing catch up with more developed economies. While ASEAN's GDP has increased fivefold since 2000 to over US$3 trillion in 2022, approximately 45 million residents in the region still do not have access to electricity.

The use of affordable and accessible fossil fuels may well be a convenient excuse to play this game of economic catch-up. Still, the estimated 2.4 million people in the region who die from pollution each year might disagree.

This speaks nothing of the frighteningly frequent forest fires in Australia, monsoon patterns in Southeast Asia, and flooding in China. The Intergovernmental Panel on Climate Change (IPCC) has found Southeast Asia faces heat waves, rising sea levels, violent storms, and reduced river flows.

In better news, all 10 states in ASEAN have signed the Paris Agreement; however, some of the commitments from individual countries could be criticised as humble. So, will ASEAN achieve its clean energy goals?

ASEAN Green Energy as It Stands

Green energy currently only makes up 15% of the ASEAN energy supply. Worse, oil demand still grows, and outstrips ASEAN's ability to produce it locally.

The region collectively aims to reach 23% of renewable energy production by 2025. However, the International Renewable Energy Agency (IRENA), says it will only hit 17% at the rate it's going.

It isn't undiluted apathy that has created this divide, but rather a lack of directed funding. The Asian Development Bank (ADB) says that around US$290 billion will need to be invested to reach that golden 23% benchmark.

The Green Funding Gap

To give you an idea of how far away we are from that funding amount, only US$6 billion was invested into renewable energy between 2009 and 2016.

With each country setting its own goals and agendas, not to mention a collective insatiable appetite for growth, it might be challenging to agree on public funding mechanisms to move away from fossil fuels. Private funding isn't efficient either, with 55% of clean energy projects relying on the public sector.

Where Can the Funding Come From?

When there is uncertainty or unwillingness to invest in infrastructure to replace systems that already serve their purpose (at least in terms of raw energy production), funding must be diversified.

Partnerships

Partnerships between investors and green developers could help bridge the gap in funding for renewable energy projects in Southeast Asia. By pooling resources, both groups could invest more money into sustainable infrastructure, helping to reduce emissions and improve air quality.

One current example is the partnership between Temasek and HSBC that promises to scale up to US$1 billion in funding for green energy infrastructure.

Additionally, partnerships between investors and green developers could help create awareness amongst investors about the ROI of renewable energy investments and how to best invest in these new technologies.

Private Capital

Private equity firms focusing on Asia currently have $US384.9 billion in reserves. Yet, investment in Environmental, Social, and Governance (ESG) is not keeping up with global trends.

This presents a huge opportunity to capitalise on the rise in awareness and concern for sustainability and climate change, as well as a chance to do some good. If a clear conscience isn't enough, look to firms like Blackrock that are investing US$673 million into clean energy infrastructure for emerging markets — it's clear there is money to be made here.

Green Bonds

As it stands, ASEAN green bond markets aren't exactly well capitalised or even mature. In fact, only 1% of green bonds in ASEAN have been issued. Contrast this with the global average of 4%, and you can see the available headroom.

Signs are encouraging; for example, ASEAN green bond and loan issuers went from 20 in 2019 to 30 (15 bonds, 15 loans) in 2020. Additionally, green products went from 32 in 2019 to 40 (21 bonds, 19 loans) in 2020.

The path to renewable targets may not be crystal clear, but it is at least visible through the smog of Southeast Asia's dense traffic and booming industry. With a little help from partnerships, private firms, and innovative financing products, ASEAN could easily meet its energy goals and enjoy a cleaner, greener future. The UN Climate Change Conference 2022 (UNFCCC COP 27) in November will show us how ASEAN is tracking here.

The factor that binds those mechanisms will be a willingness to invest in something that doesn't have an immediate or guaranteed return, but rather a longer-term, selfless bet on a sustainable future that we may not live to benefit from.