Asean needs to 'raise green investment by 400% a year'

Ann Williams

SINGAPORE (The Straits Times/ANN) - This is to protect people and economies from environmental shocks, says a study.

The Asean region needs to increase green investment by 400 per cent a year to protect its people and economies from climate change and other environmental shocks, according to new research released yesterday (Nov 15).

In dollar terms, about US$3 trillion (S$4.1 trillion) in green investment is needed between 2016 and 2030, said the study, Green Finance Needs In Asean, which was undertaken by DBS Bank and the UN Environment Inquiry into the Design of a Sustainable Financial System.

This represents a new Asean green investment market 37 times the size of the global green bond market last year.

"Asean is undergoing transformational changes as it adapts to climate change and pivots towards a more sustainable path of development," said DBS chief executive Piyush Gupta, who added that green finance can be good business too.

High-carbon, resource-intensive growth has led to pollution, depletion of natural resources and climate change.

Asian Development Bank research shows that Asean nations are more exposed to such risks than the global average.

Dr Ma Jun, the United Nations' special adviser on sustainable finance and co-chair of the G-20 Green Finance Study Group, said: "This report lays out ways in which the Asean region can unlock this investment and protect its people, environment and economies."

Current green finance flows in the Asean region are estimated at US$40 billion annually, compared with the roughly US$200 billion needed every year until 2030.

Of the US$3 trillion in investment, US$1.8 trillion will go to infrastructure and US$400 billion each to renewable energy, energy efficiency and food, agriculture and land use. Indonesia is expected to take the largest chunk.

About 75 per cent of current flows come from public finance and the rest from private finance. But with the public sector's share expected to drop to about 40 per cent in future, green finance from the private sector will need to scale up dramatically by a factor of more than 10.

But the report identifies several barriers, including limited access to green funds by small and medium-sized enterprises in Asean, and insufficient information for financial decision-makers to identify, price and manage environmental risk.

Yet another factor is the exchange rate volatility across the 10 Asean nations.

While the report acknowledged that no single solution will deliver the green finance required for the Asean region, it noted several areas that would benefit from further exploration.

For example, insurance companies or pension funds could help scale up green investment by lending directly to green projects with longer-term investment needs and purchasing green assets channelled by banks into the capital markets.