10/06/2026

ESG WEDNESDAY | JUNE 10, 2026

10

Southeast Asia’s green economy enters new calculus

Sabah demands fair economic value for conservation KOTA KINABALU: The Sabah state government is adopting a balanced growth model that demands fair economic value for its environmental contributions, while rejecting unrealistic environmental idealism that could delay the state’s socioeconomic progress. Chief Minister Datuk Seri Hajiji Noor said the state will continue to act as a responsible custodian of the environment, while remaining firm in defending the economic future of its people. He emphasised that while Sabah does not want reckless development, it also does not want an unrealistic green transition. “If Sabah continues to carry major environmental responsibility for the nation, then how does Sabah receive fair economic value from that contribution?” he asked, speaking at the World Green and Sustainability Summit here recently. Hajiji explained that conservation carries an economic opportunity cost, noting that when land is preserved and forests are protected, the state forgoes potential revenue. He added that the immense value of ecosystems absorbing carbon and supporting biodiversity benefits Malaysia, the region, and the world, rather than Sabah alone. “Therefore, the new global sustainability conversation must be centred on fairness, encompassing fair value, fair recognition, and fair investment. Sabah must evolve into a place that actively benefits from natural capital, rather than merely contributing to it.” Touching on future economic development, the chief minister highlighted that Sabah is moving into a phase of “conservation with value”. He said this involves transitioning from merely protecting natural resources to building responsible industries around them and becoming a green economy leader. This strategic shift, Hajiji said, includes developing credible carbon markets, sustainable agriculture, the blue economy, eco-tourism, and biodiversity-based innovation. He also emphasised the absolute necessity of ensuring the integration of local companies, workers, and communities into this new green value chain. Addressing the state’s energy security, Hajiji said that energy is fundamentally an economic and long-term security issue that requires a balanced and practical mix. He said this is crucial as Sabah, still a developing state, continues to expand its industrial capacity, create jobs, and strengthen its infrastructure. Guided by the Sabah Energy Roadmap and Master Plan 2040, he said that clean technologies such as solar, hydro, biomass, and biogas will continue to expand to provide reliable, accessible, and affordable energy. Noting that almost 30% of Sabah’s landmass is already designated as Totally Protected Areas, the chief minister warned that any green transition that is too expensive for ordinary families or weakens local competitiveness is ultimately unsustainable. “For Sabah, sustainability must be practical. It must be fair,” he said. – Bernama

o Capital flows to sectors where commercial demand, policy and infrastructure readiness tightly align KUALA LUMPUR: Southeast Asia’s green economy has scaled to US$290 billion and is on track to reach US$430 billion by 2030, growing at 8-9% annually. However, a realisation gap exceeding 35%1 has opened between announced and deployed green capex across the region’s power and electric vehicles (EV) value chains – a structural signal that the green economy has a conversion problem, not a capital shortage. This is according to the Southeast Asia’s Green Economy Report 2026:The New Calculus, published recently by Bain & Company and Standard Chartered. In its seventh edition, the report finds that capital deployment is no longer guided by climate ambition alone. Energy security, economic growth, and delivery now weigh equally in the calculus that determines investment flows. As a result, capital flows decisively to sectors where commercial demand, policy, and infrastructure readiness tightly align, and stalls where they do not. Of approximately US$540 billion in green capex announced across SEA’s power and EV value chains between now and 2030, only around US$315 billion is on a credible path to deployment under current conditions. “The transition is sorting leaders and laggards in ways that climate ambition alone can no longer bridge. Capital is flowing where commercial demand, energy security and policy that delivers infrastructure come together, and stalling where any of the three is missing, even where targets remain ambitious. That is the new calculus. Southeast Asia has 24 to 36 months to get the answer right, with an additional US$80 billion in green capex in the balance,“ said Dale Hardcastle, partner at Bain & Company. Tracking capital flows offers the clearest picture of where the green economy is growing, where conversion is failing, and what it will take to close the gap. Of approximately US$40 billion in annual green capex deployed across SEA between 2021 and 2025, roughly 80% went to two sectors: power and grid (around US$20 billion, 50%) and the EV value chain (around US$11 billion, 30%), in segments where demand is real and commercially viable, such as mobility and green industrial zones. EV adoption in particular has run 1.5 to 2 times ahead of earlier forecasts. Cancellation rates reveal where alignment breaks down. About 50-60% of renewable energy projects in Vietnam, Thailand, and Indonesia have been cancelled between 2021 and 2025 due to system constraints, including unclear PPA structures, permitting, and grid connection rules. Nickel and battery investment cancellation rates have reached 40-50%. These cancellations point to a systemic conversion problem in segments where commercial demand, infrastructure readiness, and policy clarity have yet to converge. Realising the full potential of green capital

Realising the full potential of green capital deployment in Southeast Asia hinges on the development of a robust power grid. – REUTERSPIC

Closing the power, grid and EV green capex deployment gap could unlock an additional US$80 billion by 2030, a 25% uplift on the baseline. The mechanisms designed to bridge the transition, including blended finance, transition credits, and corporate clean energy procurement, have an essential role to play and are needed at greater scale. The challenge has been less about the instruments themselves than the ecosystems they require: first-of-a-kind projects need policy frameworks, bankable offtake structures, and infrastructure readiness to come together at the same time, in the same place, with the same counterparties. The work ahead is not just to deploy more catalytic capital, but to accelerate the alignment that allows it to take off. “The opportunity for Southeast Asia’s green economy is substantial, but capturing it requires synchronising policy, infrastructure and finance at speed. As an international bank with a strong presence across most Asean markets, we are committed to mobilising US$300 billion in sustainable finance globally by 2030. “Our priority is to support clients through this transition by mobilising capital, structuring bankable solutions, and enabling cross-border opportunities that drive delivery,” said Standard Chartered Malaysia interim CEO, coverage head and chief financial officer Mushahid Syed. The report’s three-stage framework: Capture, Bridge, and Destination, sets out how the region can move from securing demand within current system limits today, to building shared infrastructure over the next five years, to becoming a regionally integrated green economy by the middle of the next decade. The multiplier sits in wider Asia-Pacific integration: SEA brings commercially viable demand, resource endowments, and manufacturing hubs; APAC brings capital at scale, technology, and ecosystem depth. The run-up to 2030 will decide how much of that potential is realised, and how much gets reallocated elsewhere.

deployment in Southeast Asia hinges on the development of a robust power grid, but grid investment has lagged demand growth. Investment in transmission and distribution fell 3% between 2015 and 2025 even as energy demand grew about 5% per year. New electricity demand from data centres, EVs and green industrial clusters could be an important catalyst for progress. Over the next three to four years, SEA is projected to absorb over 100 terawatt-1 Based on Bain analysis derived from a comprehensive review of multiple data sources, tracking green economy projects to assess the share of announced green capex deployed versus cancelled or stalled between 2021 and 2025. Indeed, in a Bain survey of regional data centre operators and hyperscalers, 90% cited grid connection delays as a top constraint and a majority confirmed they would pay a premium for guaranteed timelines. Equally, most data centre operators seek green electrons where available. In turn, unlocking these system constraints could help close the clean energy execution gap. Timing is critical here – each long-term contract for gas or thermal supply makes it harder for green power to replace these sources in the future, and many data centre operators are accepting interim gas or thermal supply, instead of waiting for clean power to catch up. Each gigawatt contracted on fossil fuel today narrows the window for green power to displace it, especially when under long-term agreements that stretch well into the 2030s. At the other end of the new calculus equation is where the big question lies – value capture. Four SEA countries now rank among the top 15 global EV markets by new car sales. Yet 70% of four-wheel EV value flows outside the region. Additionally, SEA captures less than 2% of global EV and battery production. Platform and supplier decisions being finalised between 2026 and 2028 will determine whether the region holds the profit pool. SEA could risk becoming a high-volume consumer and a low- margin assembler in a value chain it does not own.

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