The Asian Development Bank (ADB) held its fourth Southeast Asia Development Symposium (SEADS) on 30 March 2023 in Bali, Indonesia, with a virtual broadcast of the event. SEADS was a key side-event of the ASEAN Finance Ministers and Central Bank Governors’ Meeting.
SEADS 2023: "Imagining a Net-Zero ASEAN," brought together more than 3,000 government officials, private sector representatives, development experts, and other stakeholders from Southeast Asia and beyond. The symposium came on the heels of the latest Intergovernmental Panel on Climate Change (IPCC) synthesis report, indicating that the rise in global surface temperature to 1.1ºC above pre-industrial levels is increasing the intensity of disasters and other hazards, particularly in Southeast Asia.
SEADS 2023 amplified the urgent call for climate action to ensure Southeast Asia’s carbon neutrality by 2050, and highlighted the importance of partnerships to accelerate climate financing and decarbonization.
“Climate change is the most urgent issue facing Southeast Asia, and it is critical that we work together in building innovative solutions to accelerate the region’s transition to net zero,” said ADB President Masatsugu Asakawa at SEADS 2023. He added that ASEAN countries had committed to reducing emissions and must now instill these climate goals in their policies, plans, and projects.
United Nations Deputy Secretary-General Amina J. Mohammed also urged the private sector to present credible transition plans, enable capital flows, and participate in fossil fuel phaseout. “We need international cooperation and support to also speed the decarbonization of high-emitting sectors. No one country alone will crack the nut to decarbonizing steel, cement, shipping, and aviation sectors,” she said.
Creating an enabling environment
Indonesia Finance Minister Sri Mulyani Indrawati highlighted the importance of tapping all available resources to address the climate financing gap. “It is very imperative for all of us to be able to design the right policy and regulatory framework, as well as investment climate, so that we attract more private participation both domestically and globally,” she said in her keynote address. To speed Indonesia’s decarbonization, she noted that the country has come out with fiscal solutions, like carbon tax and carbon pricing, and deployed catalytic funding and innovative financing like green sukuk and SDG bonds.
India’s G20 Sherpa Amitabh Kant indicated that there is no shortage of finance, but stressed that countries need to strengthen mechanisms such as blended finance, credit enhancement measures, first-loss guarantees, debt-for-climate swaps, and climate policy performance bonds. “The challenge before all of us is to de-risk projects and ensure that we are able to get long-term finance from private resources,” he said.
Climate Bonds Initiative CEO Sean Kidney noted that investors are allocating more funds for the transition to net zero, and said special vehicles can be created to move capital where it is most needed. “Investors will act if we give them the opportunity of investments that meet riskier requirements and are future-proof,” said Kidney, who also underscored the importance of credit support from institutions such as the Japan Bank for International Cooperation and ADB to aid the transition.
ADB, for its part, has elevated its ambition to provide $100 billion in cumulative climate finance through 2030. ADB has also launched game-changing platforms in climate financing, such as the ASEAN Infrastructure Fund’s ASEAN Catalytic Green Finance Facility (ACGF) to provide technical assistance and upfront capital toward green infrastructure projects; the ADB Blue Pacific Finance Hub to increase ocean investments and promote a circular economy; the Climate Innovation and Development Fund, managed by ADB with grant commitments from Bloomberg Philanthropies and Goldman Sachs to support climate solutions in developing countries; and the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP), a new fund facility being designed to finance the fight against climate change.
SEADS 2023’s Bloomberg plenary panel discussion, “Financing Net Zero,” discussed how the financial sector can be more proactive in decarbonization by mainstreaming climate action in everyday activities, clarifying green taxonomies, and improving access to finance mechanisms that can support emissions reduction.
Philippine Central Bank Governor Felipe Medalla said governments can look at easing restrictions on foreign investments in green assets and reviewing lending regulations to direct more financing to green projects. “See the extent that [these regulations] can be relaxed in favor of moving towards net zero, fully realizing though that you are also creating new risks,” he said.
Retiring coal and expanding renewables portfolio
Speakers at SEADS 2023 agreed that the region’s net-zero ambition will not be achieved without tackling the growing demand for energy. To facilitate the shift to clean energy, Glasgow Financial Alliance for Net Zero Asia–Pacific Network Managing Director Yuki Yasui said that for every $1 of existing investment to the fossil fuel industry, $4 must be invested in the green economy or clean energy sector.
Minister Indrawati stressed that it is critical for ASEAN to address not only energy security, but also energy affordability and sustainability. “We need to mobilize a low enough cost financing package that can incentivize and accelerate retirement of coal or repurposing our coal-fired power plants, and at the same time scale up replacement on a clean energy technology.” She cited the new ADB-backed Energy Transition Mechanism, which will enable Indonesia to retire the 660-megawatt Cirebon-1 power plant in West Java ahead of schedule, among innovative mechanisms that can help Southeast Asia phase out coal.
United Nations Environment Programme Asia and the Pacific Office Regional Director and Representative Dechen Tsering noted that five ASEAN member-states, which account for three quarters of ASEAN’s coal emissions, have signed up for the coal-to-clean-power transition. She said ASEAN can further strengthen collective action on net zero by sharing knowledge and experiences on best practices and emerging mechanisms such as effective carbon pricing and renewable energy trading via the ASEAN regional grid.
Unlocking growth opportunities in the transition
A new ADB report, ASEAN and Global Value Chains: Locking in Resilience and Sustainability, launched during SEADS 2023, notes that greening global and regional value chains can lead to sustainable growth. In a fireside chat with CNBC Indonesia News Anchor and Journalist Dina Gurning at the SEADS opening plenary, ADB Southeast Asia Department Director General Ramesh Subramaniam noted that Southeast Asia’s participation in global value chains—valued at $700 billion, or 50% of the total trade of $1.4 trillion, with around 300 million people employed—coupled with its net-zero commitments, presents growth opportunities.
The benefits of the transition outweigh its costs. Based on the report, the cost of meeting the nationally determined contributions (NDCs) of each ASEAN member is estimated to be $50.1 billion, or 1.7% of ASEAN gross domestic product. In contrast, value chain disruptions are estimated to be $166.9 billion, while socioeconomic and biodiversity losses due to GHG emissions are estimated at $306 billion. If ASEAN economies deliver on their NDCs by 2030, said Subramaniam, they could see net savings of about $250 billion yearly.
With Asia and the Pacific responsible for more than half of all global carbon emissions, transitioning to clean energy is key to tackling climate change.
Nature-positive investments are cost-effective and sustainable ways to address the urgent problems of climate change, biodiversity loss, and pollution.
The net-zero transition can also be an opportunity to build green and resilient cities. Several speakers noted that with the majority of ASEAN citizens projected to be living in cities by 2050, urban resilience remains a critical issue, particularly given the costs that cities across ASEAN are facing from disasters.
“This massive migration to cities will require extensive infrastructure, robust public services, and improvement in urban and rural connectivity,” said Indonesia Nusantara National Capital Authority Chairman Bambang Susantono. "It is important to develop cities that are not only resilient against disaster and climate shocks, but also able to contribute to our pursuit of lower carbon pathway and maintain economic growth.”
Subramaniam said that for the net-zero transition to be just and affordable, stakeholders must also make significant human capital investments, and utilize technology partnerships—to mobilize skills, ideas, and technology—in solving complex issues. "We need not just money, but innovative solutions. We need incentives. We need policies," he said.
The symposium closed with deep-dive thematic sessions exploring various aspects of climate action, from creating resilient cities, to utilizing digital innovations and the cloud in decarbonization, climate-proofing the tourism and health sectors, and ensuring vulnerable groups are not left behind in the transition.