Delivering results at scale requires recognizing SEA’s green economy as a complex and interconnected set of systems, highlighted the report. A systems-based approach includes identifying systemic barriers that reinforce patterns and perpetuate emissions in SEA’s green economy, finding high-impact solutions to address them across multiple systems, and prioritizing those with highest ability to drive lasting change.

Such solutions offer a way to stay the course in the face of macro-uncertainties and create opportunities for SEA to unlock new green growth pathways, improve resilience and reduce dependence on imported energy, while supporting the delivery of climate goals. SEA and the wider APAC could witness an acceleration in development of the green economy in response.

“Conventional wisdom today suggests the new macro environment will slow progress in the green economy. However, Southeast Asia – and wider APAC – may see an acceleration as governments, companies and investors pivot priorities,” said Dale Hardcastle, Partner and Co-director of Bain & Company’s Global Sustainability Innovation Center. “By focusing on scalable, high impact systems-level solutions, Southeast Asia can rewrite the green economy playbook and turn current challenges into opportunities. The need now is to drive two key outcomes in parallel – significant emissions reduction and sustained economic growth – ensuring that the region not only meets its climate goals but also builds long-term resilience and prosperity,” he adds.

This year’s report also explores wider collaboration between SEA and APAC markets to grow the green economy to its full potential by leveraging shared connections between the two regions, such as common energy security concerns, strong trade relations, high foreign direct investment flows, and energy transition synergies. A closer alliance between SEA and wider APAC is key to ensuring a thriving green economy especially in this new political and economic climate where governments and corporates are reordering priorities.

APAC and SEA have critical roles to play in global decarbonization. APAC contributes half of the world’s greenhouse gas emissions, while SEA accounts for 7.5%. Both regions are equally reliant on fossil fuels to meet power demands. Based on current trajectories, most nations in APAC are falling short of their 2030 targets, and the emissions gap for the two regions is expected to widen even further by 2040 and 2050. SEA is especially vulnerable as it has not been able to bend its emissions curve yet. Interventions are needed urgently to shift that trajectory to meet targets.

"With just five years to 2030, our window for action to avoid the worst effects of climate change is rapidly closing. We need to increase the momentum and focus on pragmatic solutions with near-term impact. Stakeholders in this region have an opportunity to drive transformative, systems-level change that can balance energy security, sustainability, and economic growth,” said Franziska Zimmermann, Managing Director, Sustainability, Temasek.

Three systems-level solutions for SEA: sustainable bioeconomy, next-gen grid development, EV ecosystem

This report identified three core systems-level solutions important for SEA growth and decarbonization – a sustainable bioeconomy, next-gen grid development, and an electric vehicle (EV) ecosystem.

The bioeconomy is a critical part of the SEA-6 economy, contributing approximately 25–30% of jobs across key markets, in commodities such as palm oil, rubber and rice. However, current bioeconomy practices fuel emissions and deforestation, contributing about 30% of total emissions in SEA-6 and ongoing forest loss. Key systemic barriers such as smallholder farmer dominance, weak infrastructure and supply chain, unclear land rights and regulatory complexities and nascent carbon pricing and carbon markets prevent the region’s bioeconomy from reaching its full economic potential.

Enhancing value from agriculture & land (agriculture productivity, nature-based solutions), value from waste (2G biofuels) and implementing systems-wide reforms (land rights, supply chain) have potential to unlock vast value, while regional APAC collaboration can accelerate bioeconomy growth via offtake agreements, investments and agricultural innovation and technology sharing.

At the same time, SEA’s domestic grid requires expansion and modernization to keep up with the integration of renewables, battery storage systems distributed energy resources, and microgrids. It also requires cross-border connection expansion to accelerate the decarbonization of the grid. Governments play a crucial role in accelerating grid development through regulatory reforms, which can enable greater private investment, cross-border power trading, and potential subsidization of key infrastructure.

To this end, Green Industrial Clusters offer a high-impact, near-term solution to attract private investment in renewable generation, transmission and distribution infrastructure and other green energy solutions.  If done right, the net present cost for decarbonizing grids in SEA could decline 11% by 2050 with regional cooperation.

Road transport is a major and growing source of SEA emissions due to rising mobility demand in the region. SEA’s electric vehicle (EV) penetration is still low, with 80% of its auto manufacturing geared towards traditional internal combustion engine vehicles. As the world moves towards greater EV adoption, SEA could be at economic risk if it does not catch up. The region needs a dual strategy to scale EV demand and local production, to retain its manufacturing edge and drive decarbonization in the most cost-effective way.

Green corridors could fast-track the electrification of commercial fleets, while regional APAC collaboration could unlock shared value through joint investments, and integrated supply chains across battery, EV manufacturing, and charging, leveraging the raw materials supply chain present in SEA.

Three enabling solutions to make systems-level solutions viable and successful – climate & transition finance, carbon markets, and green AI

The report also highlighted three essential enabling solutions required to augment the impact of the systems-level solutions.

Climate and transition finance is growing in SEA, but a funding gap of over USD 50 billion remains and could widen amidst macro uncertainty. Blended finance is growing but is constrained by small deal sizes, red tape, and investor mismatch. Favorable policies, talent development and public-private partnerships are necessary to move the needle. Innovative financing mechanisms such as offtake-based financing and infrastructure funds are gaining traction, but success would depend on developing standardized repeatable models to enable scale.

The report also highlighted that cross-stakeholder coordination is critical— governments must standardize taxonomies and expand co-financing, while commercial investors scale up.

Chow Wan Thonh, Head of Coverage, Singapore and ASEAN, Standard Chartered, said, “The transition to a low-carbon economy is more compelling and crucial than ever. With a presence in all ten ASEAN markets, Standard Chartered has an important role to play in facilitating the flow of capital and investment to support our clients, as they transition towards low carbon business models of the future that support enduring growth. As the report sets out, the opportunity to finance the transition is significant and we will continue to come alongside our clients as their partner of choice on this journey.”  

SEA is making progress in carbon pricing and markets, with regulatory advancements and increasing credit issuance. However, these need to be accelerated to reach full potential, and particularly to help create financial incentives to protect and restore ecosystems, rather than exploiting them. Scaling carbon markets requires catalyzing demand, building supply, and developing enabling infrastructure. Most importantly, the region needs to secure stable demand at prices that support project viability. To grow the market, SEA must adopt compliance schemes and establish robust registries/exchanges to boost confidence in credits.

Anshari Rahman, Director of Policy and Analytics at GenZero, said, “Southeast Asia’s carbon markets are gaining momentum, but we can do more to unlock their full climate and economic potential. Scaling high-integrity credit supply, backed by robust, predictable policy frameworks and enabling infrastructure, is essential to attract investment and drive demand. To deliver lasting social and economic gains, supply must also meet international benchmarks like ICVCM and CORSIA – where global demand is headed. With coordinated action, carbon markets can become a cornerstone of Southeast Asia’s net-zero transition and economic resilience.”

AI represents both challenge and opportunity for the green economy. SEA’s data center demand is growing rapidly at a compound annual growth rate of 19% to 2030, driven by both AI and non-AI workloads. Data centers could contribute up to 2% of SEA-6 emissions but this trajectory can shift with advances in hardware, software, and increased sourcing of clean energy. Sustainable data center growth will require diverse green energy solutions, and increasing access to clean energy grids would be key, while enabling procurement through power purchase agreements or high-integrity offset mechanisms. AI also offers powerful opportunities to cut emissions by 3–5% across high-emitting sectors in agriculture and nature, power and transport, and unlocking this potential will require targeted investment, policy support, and scaled adoption.

According to Spencer Low, Head of Regional Sustainability, APAC, at Google, “We need to responsibly manage the environmental footprint of AI and data centers through model optimization, efficient infrastructure, and emissions reductions. Google is working towards our goal of 24/7 carbon-free energy, with catalytic investments across APAC such as recent ones in geothermal and offshore wind. Just as important is the need to identify and scale up AI applications that drive emission reductions in grids, agriculture, manufacturing, and other sectors.”

Green investments rose 43% to USD 8 billion yoy led by solar and waste management

SEA-6 saw a notable 43% spike in private green investments to USD 8 billion in 2024 compared to the previous year, with Malaysia and Singapore contributing over 60% of deals. Power continues to hold two-thirds share of green investments in the region with increase in deal sizes. Within the sector, solar witnessed the biggest jump (100%) in investments while waste management deals increased 60% year-on-year, driven by water treatment and recycling projects.

Corporations continue to strongly lead green investments in SEA, as with India and South Korea. Climate funds’ and infrastructure funds’ interest in the region also grew significantly by four times and 14 times, respectively.

Notably, foreign investments outside of APAC to SEA-6’s green economy more than tripled over the last year, while foreign investments from APAC doubled. SEA-6 domestic investment fell by 40% but these investors were active in green growth in the rest of APAC.

Advancing the green economy using a systems-based approach needs concerted effort from all stakeholders – corporates, investors, and governments. Decarbonization in SEA must now deliver practical outcomes beyond targets. It is no longer a cost driver but a strategic growth lever, with both environmental and economic benefits for the future of the region.

* SEA-6 refers to the six economies - Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

^# The emission reduction of ~300MtCO2 has been calculated based on forecasted adoption of low-carbon solutions and their emissions impact from production, use, efficiency gains, fuel shifts, land use changes, etc.; prioritized Systems-level solutions have potential to close ~50% of emissions gap between SEA-6 emissions based on current policies vs accepted pledges in 2030.