Investment readiness is key for ASEAN energy transition

ASEAN nations are striving to become leaders in the global energy transition, aiming to boost renewable energy to 30% of their total primary energy supply and power capacity by 2030. However, despite a potential for $3.7 trillion–6.7 trillion in green investments by 2050 and the creation of 49 million–66 million jobs, progress remains slow.

This is due to a lack of investment readiness, with issues extending beyond just the availability of sustainable finance. Policymakers cite legal and regulatory risks, access to finance, project cash flows, technology risks and currency fluctuations as primary obstacles. Private investors, on the other hand, are concerned with revenue uncertainty, high equity costs, bankable projects, high debt costs, and construction/operational uncertainty.

ASEAN has developed frameworks like the ASEAN Taxonomy for Sustainable Finance, ASEAN Green Bond Standards, and the ASEAN Catalytic Green Finance Facility, but these have not led to rapid project implementation. The root of the problem lies in the demand side, or the ability to mobilize available funds into bankable energy projects that meet investor expectations, a concept known as "investment readiness."

While sustainable finance instruments are available, they are not effectively translating into new energy-transition projects. ASEAN's energy investment has not yet reached its full potential, as it only receives 20% of global energy investment despite accounting for two-thirds of the world's population. To bridge this gap, governments, project developers, financial institutions, and development partners need to enhance project preparation, reduce risks, and make projects more attractive to investors.