Accelerate to Net Zero: a view from Southeast Asia

Person in field with wind turbine

The Carbon Trust’s Chief Executive, Tom Delay, kickstarted the event by emphasising the need to do more than what is required in the Net Zero mission by delivering impact, “however hard we know it might be.” 

The urgent challenges threatening both lives and livelihoods in Southeast Asia require both cross-sectoral and systematic issues to be addressed, said Xinying Tok, Head of Southeast Asia at the Carbon Trust. The region is where “the percentage in GDP loss by 2048 will quickly be two times the global average due to climate change impact,” but she added that there have been many positive recent developments to celebrate. 

 “2022 was also a year of growing commitments for a just transition away from coal-fired power, building on the momentum of COP26 where 23 countries committed to scaling up green power and phasing out of coal,” she said. Indonesia, Vietnam, and Singapore are among those countries. 

Significant resources needed 

However, the transition away from coal and climate finance still requires tremendous resources in Southeast Asia, where half of the electricity generation comes from coal, said Ambassador Chantale Wong, US Executive Director at Asian Development Bank (ADB). 

She shared that ADB has been positioning itself “as the region’s climate bank,” increasing its climate financing commitments from $80 billion to $100 billion between 2019-2030, one third of which finances climate change adaptation while the remainder goes to mitigation.  

“We need to incentivise the early retirement of existing, unabated coal plants, some of which can operate for 40 more years,” Ambassador Wong said, adding an example of the landmark memorandum of understanding (MOU) signed last year for the first early retirement plan for a coal-fired power plant with a 660-megawatt capacity in Indonesia under the bank’s own Energy Transition Mechanism. It aims to reduce carbon emissions through a country platform model that can be replicated beyond Indonesia.  

Amidst challenges in tackling climate change, Serena Toh, General Manager, Group Sustainability at Keppel Corporation, shared that there are tremendous commercial opportunities as well. Addressing the inadequate supply of renewables in Singapore, Serena highlighted the company’s success in working with various parties to import renewable energy from Laos. Keppel is also developing Singapore's first hydrogen-ready power plant. 

Utilising climate technology 

The lack of familiarity among most businesses with the use of climate technology is another issue in the region at a time when these tools are “not yet cost-competitive nor at the right scale,” said Ms Jacqueline Poh, Managing Director at the Singapore Economic Development Board (EDB). She stressed the importance of collaboration between governments, businesses and researchers, illustrating this through the Carbon Capture and Utilisation Translational Testbed initiative. Led by A*STAR and supported by EDB and JTC, this facility aims to enable 13 partners from the academia and private sector to pilot and scale up new technology that will capture and utilise carbon. 

In the meantime, some businesses in the region are adopting climate technology that is market-ready and available. In Malaysia, the IKEA franchisee, Ikano Retail, is maxing out the space on its rooftops for self-generating solar plants and aims to enter into a Power Purchase Agreement that would involve setting up a new off-site solar farm. “The off-site deal could supply 43% of the energy we consume at four IKEA stores and three large shopping centres, bringing us close to meeting our ambition of 100% renewable electricity for our properties,” said Corinna Schuler, Sustainability and Corporate Communication Director at Ikano. Operating across four Southeast Asian countries, Ikano serves plant-based meatballs in IKEA restaurants as an alternative to the company’s popular Swedish meatballs to help reduce emissions from red meat consumption. 

What will it take to deliver on Net Zero promises? 

What it takes for business leaders to follow through with their Net Zero promises was one of the audience’s most voted questions. Sebastien Borne, Group Sustainability and Procurement Director at Dynapack Asia, shared that engaging employees to drive actions across the different levels of the company is key. An example of this is implementing the use of recycled materials. Installing solar panels was the easiest option for his company to decarbonise some 9-10% of the operational emissions. He acknowledged that looking for solutions beyond solar panels is not easy, but he is convinced that more low carbon options will be available in the future as businesses progress to Net Zero together.  

Data is also essential in driving a company’s Net Zero strategy. In order to get top management’s buy-in, they need data to understand where emission sources lie within the business. This information can help inform decisions on where mitigation measures should be implemented, according to Adelene Anthony Sinniah, Head of Sustainability at Axiata Group. She added that in 2021, Axiata signed up to the Science Based Targets initiative (SBTi), which helps organisations set science-based targets aligned with the ambition to limit global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. The company is planning to submit its targets to the SBTi for official validation later this year. 

It is also critical to raise awareness about sustainability amongst SMEs, which is currently low, pointed out Huishi Li, Senior Vice President, Group Corporate Sustainability Office, United Overseas Bank (UOB). SMEs form the backbone of Southeast Asia’s economy, so helping them embrace sustainability is key to moving the needle on achieving decarbonisation in the real economy and for banks to meet their Net Zero commitments. The bank has created the UOB Sustainability Compass for their customers. The tool provides a step-by-step guide for SMEs to kickstart their sustainability journeys. SMEs are guided through a roadmap that identifies the different phases of going sustainable and provided with a customised report to drive their sustainability initiatives, so that they can achieve greater long-term resilience. 

Sustainable finance as a key enabler 

In Vietnam, Mai Nguyen, Senior Associate at VinaCapital opined that carbon credit trading, which the Vietnamese government plans to pilot by 2025, is expected to be a new business opportunity where there is a lot of potential for helping businesses achieve their Net Zero goals. On top of investments her company has been making in renewable energy and LNG energy projects, VinaCapital has also pursued green building certificates.  

“Sustainable finance is a key enabler for accelerating the transition towards climate resilience through driving more green and sustainable investments,” shared Dr Pang Chin Hong, Senior Vice President, Group Sustainability at Frasers Property. With real estate accounting for nearly 40% of global carbon emissions, Frasers Property has set group-wide goals such as achieving Net Zero carbon by 2050 and financing the majority of new sustainable asset portfolios with green and sustainable financing by 2024. To date, the company has secured 33 green and sustainability-linked loans, and three green and sustainability linked bonds, totalling over $9 billion and representing approximately 50% of net borrowings. 

The dominant presence of coal-fired power plants in the region’s economic system was highlighted as a pressing concern (suggested additional read: Coal transition and the need for a system-wide approach).“The uptake of renewable energy is not going to be accelerated if we do not reduce the capacity of our coal fleets,” said Pradana Murti, Risk Management Director at PT Sarana Multi Infrastruktur (Persero) - PT SMI. “PT SMI has been engaging with the Financial Services Authority in Indonesia (OJK) on the creation of a transition taxonomy to channel capital towards financing coal retirement in Indonesia.” 

“We need to practise what we preach,” he stressed.