Southeast Asian nations have been vocal about environmental sustainability issues in recent years.
However, this is at odds with findings from a report titled *Southeast Asia’s Green Economy 2023 Report*, by Bain & Company, Temasek, GenZero, and Amazon Web Services. The report found that green economy investment in Southeast Asia actually decreased over the past two years.
In 2022, Southeast Asia received only US$5.2 billion (approximately Rp77.45 trillion at an exchange rate of Rp14,895/US$) in green investment. This represents a 7% year-on-year (YoY) decrease.
In 2021, green investment reached US$5.6 billion (approximately Rp83.41 trillion), which was also lower than the US$6.6 billion (approximately Rp98.3 trillion) recorded in 2020.
According to Bain & Company, a decline in foreign investment is one reason for the sector's downturn in 2022. Investment from outside Southeast Asia fell by 50% YoY, although intra-regional investment doubled.
Bain & Company stated that while green investment commitments in Southeast Asia increased in 2022, these commitments haven't translated into capital expenditure.
“New capital commitments from governments and corporations increased, but haven’t materialized into more transactions and large-scale spending,” said Bain & Company.
One example is the cooperation between governments and the European Union, the United States, Japan, and other international partners over the next 3-5 years to help Indonesia and Vietnam phase out fossil fuels. Bain & Company noted that this investment is worth more than US$35 billion.
Furthermore, the research also points to regulatory uncertainty and slow permitting processes as obstacles to green investment in Southeast Asia. Strong policies are needed to support sustainable economic efforts.
“Gaps in regulation, enforcement, and the nascent market for nature-based solutions are slowing progress (in green investment),” stated Bain & Company.
Bain & Company also stated that Singapore is the most active investor in the region, participating in 30% of all transactions over the past three years.
Moreover, the research indicates that over 50% of green investment in Southeast Asia in 2022 went to Singapore and Indonesia. “Indonesia and Singapore continue to grow in investment, while other countries experience fluctuations driven by very large deals in the Philippines and Thailand,” said Bain & Company.