The green transition—even as it gets downplayed in some advanced economies like the U.S.—is still underway in the rest of the world, as nations build out their renewable energy infrastructure and try to develop a low-carbon economy.
But there remains a huge funding gap, particularly among emerging markets with less ability to tap global capital.
Southeast Asia needs about $200 billion a year to fund its green transition, Mian Ying Chen, the head of industrials at UOB’s sector solutions group, estimated at the Fortune Innovation Forum in Kuala Lumpur on Nov. 17. Yet just $50 to $60 billion in investments are currently being made each year.
Chen added that green investments can’t exclusively focus on the largest companies. “It’s very important for us to pay attention to the small- and medium-sized players as well,” she said. These enterprises play a key role in global supply chains, and are especially abundant in emerging regions like Southeast Asia.
In October, the Association of Southeast Asian Nations (ASEAN) opened a center to facilitate the green transition in micro-, small- and medium-sized enterprises (MSMEs).
“The ASEAN green transition is predominantly funded by debt—a lot of debt,” she said, arguing that although banks are “increasingly creative” in how they structure loans, other private investments are also needed to supplement them.
Global businesses have started to downplay their sustainability programs, in part due to macroeconomic uncertainty, growing demand for potentially dirty resources, and political hostility in places like the U.S.
Yet investing in the green transition benefits businesses in the long run, said Mohd Faris Adli Shukery, the managing director of Johor Plantations Group Berhad (JPG), a Malaysian palm oil company. Doing so has allowed his company to sell their products in markets which are more regulated (e.g. Europe), thus improving profitability.
“We have been able to capture premiums, rather than just commodity prices, so that has enabled us to perform better in terms of our financial results,” said Mohd Faris.
JPG has invested in the conversion of biogas (an agricultural by-product) to biomethane, which can be used to substitute natural gas in energy generation. The company is also building an integrated sustainable palm oil complex, which is powered by a central renewable power plant.
These sustainability initiatives have boosted investor appetite in JPG’s shares, Mohd Faris said. He argued that beyond meeting environmental and social requirements, these initiatives also help companies produce results, remain profitable and sustain their existence.
JPG listed on Bursa Malaysia, the country’s stock exchange, in July 2024. Shares are up 80% since then, even as the benchmark FTSE Bursa Malaysia KLCI index has stayed flat.
Environmental activists have previously targeted the palm oil industry due to deforestation concerns, among others. Since then, the industry has tried to embrace measures to improve its environmental performance through measures like the Roundtable on Sustainable Palm Oil.
“Even though people give a lot of flak to the palm oil industry, the response from the investors has been very, very encouraging. In fact, we have gotten a lot of response from foreign markets—including Western markets—that subscribe to our shares,” Mohd Faris said.
With better informed and more socially-conscious consumers, green investments are now a necessity, not a luxury.
“This generation [of consumers] are more aware of the products that they consume—whether they’re sustainably sourced or not, [and if] they’re circular,” said Chen of UOB.
Industry giants like JPG have a role to play to ensure smaller players aren’t left behind, Mohd Faris said. JPG has a smallholder inclusion programme, where the firm helps smaller plantations to “practice good agronomy” and attain a sustainable palm oil certification.
Financial institutions like banks are also key in catalyzing ASEAN’s green transition, Chen said. “We are asking our clients, ‘What are the transition risks involved? How can we help you?’”