The clock is ticking on the world’s climate goals. With Asia accounting for half of the world’s carbon emissions due to its heavy reliance on fossil fuels, the region is a deciding factor in the race to limit global warming to 1.5°C by 2050.
While Asia has made significant strides in sustainable infrastructure development, it still has a long way to go to meet global climate targets. With escalating energy demands and worsening climate challenges, Southeast Asia alone needs to invest over 1.5 trillion US dollars to achieve a one-third reduction in emissions by 2030—a substantial increase from the 5.2 billion US dollars reported in 2022. This growing demand makes the challenge even more daunting.
But in uncertainty, there is opportunity. The region possesses the resources to decarbonise and thrive at the national and regional levels. Asia is demonstrating a collective awareness of the critical need for change on the renewable energy front. Countries like Viet Nam and the Philippines are strongly committed to decarbonisation, with ambitious renewable energy projects paving the way for wider energy storage adoption.
The approach to sustainable infrastructure is evolving
While the fundamentals of sustainable infrastructure—delivering long-term economic, social, and environmental benefits—remain constant, the approach is evolving globally and in Asia.
The traditional model of government-led infrastructure development is giving way to a more collaborative landscape. Private investors, developers, and even communities increasingly play crucial roles in fostering innovative partnerships and financing solutions. This approach leverages diverse expertise and unlocks new opportunities for sustainable infrastructure development.
Today, strong partnerships hinge on a shared vision, mutually agreed goals and clear regulations. At the recent Asia Infrastructure Forum (AIF) 2024, a recurring theme highlighted across the panel discussions was the importance of close regional cooperation. Asia’s unique landscape demands a nuanced understanding of what sustainable infrastructure truly means to each country. Simply replicating global solutions might not be the most effective approach. By increasing regional collaboration, countries can pool their knowledge and expertise to progress towards sustainable infrastructure at a pace that aligns with their unique needs and challenges.
Innovative financing models are gaining even more traction
The widening gap between infrastructure needs and available financing presents a critical challenge for Asia’s sustainable development ambitions. Innovative financing models offer a much-needed lifeline to bridge this gap and accelerate the region’s green transition.
Traditionally, governments shouldered the burden of infrastructure development. However, tightening budgets and stretched resources have limited their ability to keep pace with population growth, especially in Asia. Beyond simply increasing the funding pool, innovative financing mechanisms enhance project bankability for private investors by reducing risk, improving liquidity, and minimising volatility.
One such mechanism is the Financing Asia’s Transition Partnership (FAST-P), a blended finance initiative by the Singapore Government in collaboration with key public, private and philanthropic sector partners, which aims to mobilise up to 5 billion US dollars to de-risk and finance transition and marginally bankable green projects in Asia. FAST-P targets the key themes of green and transition investments most pertinent in Asia, from the managed phase-out of coal to developing renewables to modernising grid systems.
Another innovative financing mechanism by Bayfront Infrastructure Management is its Infrastructure Asset-Backed Securities (IABS), which help facilitate the recycling of capital and liquidity from banks to address Asia’s infrastructure financing gap. In July 2024, Bayfront successfully issued its fifth IABS. This transaction featured a portfolio of project and infrastructure loans and bonds issued by borrowers in Asia Pacific, the Middle East, the Americas and Africa. Notably, it included an innovative Class D mezzanine tranche guaranteed by GuarantCo. This guarantee significantly reduces risk for investors, making the tranche more attractive and increasing overall investment in the sustainable infrastructure project portfolio.
For such mechanisms to work, transparency and clarity are crucial. Initiatives like the Singapore-Asia Taxonomy for Sustainable Finance establish clear criteria for identifying sustainable infrastructure projects. This standardisation helps unlock additional funding sources from investors seeking green and transition investment opportunities.
Innovative financing mechanisms coupled with the increasing recognition of the need for consistency in standards have the potential to unlock private financing and propel the region’s progress towards a greener future.
The compelling case for investing in brownfield assets
It is becoming increasingly evident that the transition to clean energy requires a two-pronged approach: scaling up clean energy supply and optimising energy demand. Investing in the performance of brownfield assets or existing infrastructure can be a powerful strategy for achieving both goals. Retrofits and upgrades help to increase the lifespan of existing buildings and can be a more sustainable and cost-effective option than greenfield assets or constructing an entirely new infrastructure.
One example is Keppel’s Energy-as-a- Service (EaaS) model, which enables building owners and tenants to subscribe to energy usage and management services without upfront capital investments. Keppel designs and retrofits existing chilled water systems to improve efficiency, leading to substantial energy savings and reduced operational costs. For instance, Keppel’s EaaS project at Centara Watergate and Watergate Pavilion in Thailand is expected to achieve over 23 per cent in cost savings over the project’s 20-year lifespan. Additionally, it will reduce carbon emissions by over 18,000 tonnes.
But the potential goes beyond commercial buildings. Industrial facilities like factories and treatment plants also present rich opportunities for retrofitting and upgrades. We can reap significant environmental and economic benefits by making these existing assets more efficient. The Asia Sustainable Infrastructure Advisory (ASIA) Panel Report specifically explores the growing potential of brownfield investments.
Leveraging both proven and new technologies is key to scaling sustainable infrastructure development
Building upon the advancements of recent years, digital solutions like data analytics and artificial intelligence (AI) monitoring continue to be crucial in boosting sustainable infrastructure projects. They pave the way for smarter, more responsive infrastructure that minimises resource consumption and maximises impact. Take Lippo Malls in Indonesia as an example. Partnering with an energy services company, G-Energy Global, the Lippo Group managed to achieve the EDGE (Excellence in Design for Greater Efficiencies) green building certification last year for two of its malls. Through rainwater harvesting and smart faucets, the malls were able to increase energy savings by over 20 per cent while reducing water usage by 30 per cent. With energy efficiency being a key point of focus for Asia’s decarbonisation pathway, digitalisation will continue to help building owners and developers optimise energy, leading to a smaller carbon footprint and cost savings.
Together with established technologies, exploring innovative solutions like hydrogen fuel will also be crucial for meeting ambitious net-zero targets. The potential is vast with an estimated 500 billion US dollars worth of hydrogen projects planned globally by 2030. Hydrogen offers a cleaner alternative for hard-to-abate sectors like steel, petrochemicals, and fertilisers, where emissions are notoriously difficult to reduce.
While still in its nascent stages in Asia, hydrogen holds immense promise for decarbonisation and sustainable infrastructure development. The COP29 Presidency has prioritised hydrogen in its climate agenda through the the COP29 Hydrogen Declaration, which aims to unlock the potential of a global market for [clean] hydrogen and its derivatives with guiding principles and priorities, to address regulatory, technological, financing and standardisation barriers. The initiative will reinforce the growing momentum behind hydrogen as a key solution for reducing emissions and promoting sustainable development.
Regulatory reforms are needed to achieve ambitious net zero targets
Ambitious net zero targets and international pledges paint a promising picture, and Asia is showing encouraging progress. India’s clean energy transition is an example of this regional resolve, having exceeded its COP21 commitment by achieving 44 per cent of non-fossil fuel power capacity well ahead of schedule. This rapid growth of solar and wind in India’s energy mix offers valuable lessons for the rest of the region.
Despite these positive developments, the gap between ambitions and reality remains stark. Asia’s economic growth continues to be heavily reliant on fossil fuels, putting the region on track to deplete the global carbon budget for a 1.5°C future by 2040. Robust governance reforms are crucial to bridge this gap.
Implementing clear policy measures like preferential tax treatment for green buildings or penalties for non-compliant energy-efficient standards can incentivise sustainable choices and discourage fossil fuel dependence. Additionally, robust enforcement mechanisms and transparent reporting requirements are essential to ensure intentions translate into tangible results. The Philippines stands out as a promising example, extending foreign ownership to 100 per cent for renewable energy projects. The country’s second green energy auction held in 2023 awarded 3.4 GW of renewable capacity, where 1.2 GW was set aside for ground-mounted, rooftop solar, and onshore for 2024 to 2025 and 2.2 GW for 2026.
Infrastructure investment will continue to be the cornerstone to accelerate progress towards achieving our net zero targets. However, Asia’s diverse and complex landscape demands a rethinking of our approach. Infrastructure Asia will continue collaborating with our partners to identify novel solutions and forge strategic partnerships to help Asia make more assertive strides towards its sustainability targets, building a future where economic prosperity coexists with environmental responsibility.
Connect with us to explore opportunities in the region.
Infrastructure Asia is a project facilitation office established by the Singapore Government (set up by Enterprise Singapore and the Monetary Authority of Singapore) to support Asia’s social and economic growth through sustainable infrastructure development.
It is committed to developing a robust pipeline of bankable projects and investment opportunities by working closely with regional governments, private companies, and both commercial and multilateral development banks.
The views and opinions expressed in this article are solely those of the authors and do not reflect the official policy or position of ASEAN.
