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The global transition to sustainability cannot be fully realised without Asia’s active participation. With Asia accounting for half of the world’s greenhouse gas emissions and coal providing nearly 60% of the region’s power, the path to net-zero emissions globally hinges on Asia’s involvement. This makes the region a focal point in the fight against climate change, where a delicate balance between sustainability, affordability, and accessibility must be struck.
As the International Monetary Fund points out, Asia’s transition to greater sustainability has global implications. “The region contributed about two-thirds of global growth last year, and will again in 2024, but its heavy reliance on burning coal for energy means that it contributes more than half of harmful global greenhouse gas emissions,” Cheng Hoon Lim, the Deputy Director in the Statistics Department of the IMF says.
According to her, Asia’s revised Nationally Determined Contributions under the 2015 Paris Agreement show that the region is committed to change. “Asia can aid the climate fight by demonstrating how to balance economic growth and environmental sustainability,” Lim adds.
Transitioning away from fossil fuels is critical in the region, given its global implications for meeting international net-zero targets. However, according to estimates by the International Energy Agency, it is a delicate balancing act because nearly seven million people are employed in the coal economy across the region.
Hence, the shift away from coal not only poses technical and financial challenges but also necessitates robust policies to protect the workforce involved in the industry. BNP Paribas Asset Management’s Chief Market Strategist, Daniel Morris, emphasises that given the high percentage of energy derived from coal, “the challenges of a transition that moves from coal to other, renewable sources of energy” are significant, particularly with so many jobs on the line.
To facilitate this transition, IMF’s Lim suggests improving the framework around data, taxonomies, and disclosures. She emphasises the importance of gradually eliminating fossil fuel subsidies and expanding carbon pricing measures to fund sustainable public investment. This approach would drive investment in green technology, employment, and economic growth while also supporting vulnerable households.
Asia at the forefront of investments in sustainability
Despite these challenges, Asia, led by China, is already at the forefront of global sustainable development, investing heavily in green technologies. The region accounts for 70% of the $470 bn global investment in clean energy needed to meet 2030 net-zero goals.
According to MSCI, sustainable bond issuance in Asia-Pacific grew 17% to $172 bn in the first nine months of 2023, outpacing the global growth of 4%.
“Governments in Asia have played a key role to promote green technology through policies, subsidies, and tax incentives. China, Japan, and South Korea, in particular, have recognised the potential of solar energy and battery storage early on, directing substantial investment towards these technologies,” opines Elodie Laugel, Chief Responsible Investment Officer at Amundi Asset Management.
The outcome of COP28 in Dubai in December of last year aligned with China’s existing roadmap to peak CO₂ emissions by 2030 and reach net-zero by 2060, says Vicki Chi, Portfolio Manager at Robeco.
“China’s State-Owned-Enterprises, which account for more than half of the country’s GDP, are also embracing the transition, helping China achieve its goals and providing capital for innovation that will also benefit private sector players,” adds Chi.
Technology a key factor in Asia’s sustainable economic ambitions
Technological advancements, such as artificial intelligence (AI), robotics, automation, and the Internet of Things, play a crucial role in Asia’s sustainability drive. “These technologies are key to improved energy and resource efficiency in traditional sectors like transport, manufacturing, finance, healthcare, and agriculture,” states Robeco’s Chi.
In addition to technological advancements, falling technology costs have led to the rapid acceleration toward renewables, making solar and wind energy more economically competitive. Jimmy Chen, Analyst and Portfolio Manager at Comgest, notes that solar and wind power can now generate electricity at a lower cost than thermal sources, and “these days, renewable electricity generation can be economically competitive without subsidies.”
Asian nations are also diversifying into green steel, green hydrogen, and green data centres. “China’s investment in sodium-ion batteries and Japan’s green steel & hydrogen strategy highlight the region’s commitment to diversifying its green technology portfolio,” says Amundi’s Laugel.
In Southeast Asia, green data centre projects have drawn significant investment after renewable energy, according to a study by Bain & Company, GenZero, Standard Chartered, and Temasek. Malaysia and Singapore particularly support energy-efficient green data centres that rely less on fossil fuels.
Asia’s commitment to sustainability, combined with proactive government policies and shifting corporate strategies, illustrates the region’s crucial role in the global shift to sustainability. Despite the complexities, Asia is primed to lead the world in sustainable energy investments and innovation.
