Indonesia's Finance Minister Sri Mulyani Indrawati speaks to journalists during the Association of Southeast Asian Nations (ASEAN) Plus 3 Finance and Central Bank Deputies' Meeting in Nusa Dua on the Indonesian resort island of Bali on March 30, 2023. (PHOTO / AFP)
Southeast Asian economies need financing for energy transition to help the region pursue low-carbon growth, a regional forum heard on March 30.
Member-countries of the Association of Southeast Asian Nations, or ASEAN, “are committed to continue growing, but we are also strongly committed to achieve net-zero emission by 2060 or earlier,” Indonesian Finance Minister Sri Mulyani Indrawati said in her opening keynote speech at the Southeast Asia Development Symposium (SEADS).
The hybrid forum, organized by the Asian Development Bank, was held at the Indonesian resort island of Bali. Indonesia is this year’s rotating chairperson of ASEAN.
One of the challenges pertaining to climate finance is aligning global investment rules to incentivize investment in programs that promote emissions reduction, said Indonesian Finance Minister Sri Mulyani Indrawati
Indrawati said it is “very important” for ASEAN to contribute to global climate change commitment. While rapid economic growth is boosting ASEAN’s energy consumption, it should not lead to higher carbon emissions, the Indonesian minister said.
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She noted that ASEAN economies still depend on fossil fuel, with renewable energy sources accounting for less than 20 percent of the regional energy supply. The region needs to invest at least $27 billion each year to develop renewable energy sources, but only managed to attract $8 billion annual investments for the past few years, Indrawati said.
While it is important to invest in energy transition, “limited access to the international capital market (and) lack of domestic resource mobilization … create additional challenges in designing the right energy transition mechanism and policy framework”, she said.
“It is critical for ASEAN to address, on the one hand, the need to have energy security, but also at the same time (address) the affordability and sustainability (of energy sources),” Indrawati said. “When we discuss about the affordability … (it is about what) is affordable for the people, for the industries (and) for the government budget.”
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Indrawati said one of the challenges pertaining to climate finance is aligning global investment rules to incentivize investment in programs that promote emissions reduction. She said that ASEAN has taxonomy for sustainable finance to help with the energy transition.
Amina Mohammed, deputy secretary-general of the United Nations, said international cooperation and support is needed to accelerate decarbonization.
“I see innovation and a vision in Southeast Asia and the understanding that decarbonization is good for the environment and for health,” Mohammed said in a speech delivered via video feed. But she said no single country can “crack the nut” to decarbonize industries and ramp up renewable energy development.
World Bank meetings next month will serve as the “first litmus test of the international community's resolve to answer the call to fundamentally reform the international financial architecture this year to enable affordable low-cost capital to flow to the places that need it most”, she said.
The ADB has estimated that ASEAN needs $210 billion each year for climate adaptation and mitigation. An opening plenary panel discussed why the region needs innovative schemes to finance decarbonization.
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Herry Cho, managing director and head of sustainability and sustainable finance at the Singapore Exchange, said 2.5 percent of the global bond market, which is estimated to be around $125 trillion in size, can be considered a “green social sustainability and sustainability link bond”.
“In the past 12 months, 20 percent of all issuances on our market were green, social sustainable sustainability bonds, (and) that's quite significant,” Cho said.
“When we think about each of the asset classes, there are some roles that we play to facilitate capital flow towards sustainable transition, but there are some ways where we also have to take the lead as well,” she said.
