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At first glance, it can be challenging to envision a clean and green future for Southeast Asia. The region is notorious for its environmental problems, from the haze covering Indonesia to the pollution clogging rivers in Vietnam.
Globally, we are facing the threat of climate change, and current economic conditions threaten to stifle all green initiatives before they can really make a difference. And yet there is reason for optimism. Several countries in Southeast Asia have taken steps to address the issue of sustainability. If they succeed in executing their plans, they will reap a windfall of investment opportunities.
Crucially, sustainable innovation is not just symbolism – it can also be big business. Environment, Social and Governance (ESG) focused assets are expected to grow $50 trillion by 2025. But can Southeast Asia seize this global opportunity?
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What is the current state of sustainability in Southeast Asia?
There is no one-size-fits-all answer to this question, as sustainability efforts vary significantly from country to country. Indonesia, for example, is working on it fight the mist caused by slash-and-burn farming practices, and in 2018 the government imposed a moratorium on the development of new palm oil plantations.
However, to illustrate the fragility of such policy-making, the Indonesian government has put it on hold for a while moratorium in 2021although it has promised not to approve any new palm oil licenses in the future.
In areas less dependent on agriculture, such as Singapore, the approach to sustainability is much more technical. The Government of Singapore has recognized the importance of sustainable innovation and its $133 million Enterprise Sustainability Program (ESP) encourages companies to develop sustainable solutions that they can implement in their business models.
The fruits of these efforts are companies such as Karana Foods, which produces plant-based meat alternatives, and collaborations with &ever, a German vertical farm that aims to produce 1,400 kg of vegetables and herbs per day.
Problems in Southeast Asia in achieving sustainability
There are several issues facing countries in Southeast Asia when it comes to sustainability, but there are three main hurdles. First, many countries still rely heavily on natural resources, such as timber and coal, for their economic growth. This dependence means these countries need to be quicker to implement sustainable practices because they fear the impact on their economies.
Second, more data and transparency are needed to assess the state of sustainability in Southeast Asia. This lack of data hinders policy making and makes it difficult for companies to identify opportunities.
Singapore is addressing this as part of its ESP by working towards a common disclosure portal for investors and financial institutions to access standardized data and for companies to use as an internal ESG monitoring tool.
Third, increasing urbanization puts pressure on resources such as water and energy. This is especially evident in Singapore, which has one of the highest population densities in the world. The country is therefore working on initiatives such as the reuse of water and solar energy to reduce this pressure.
Related: The Emergence of the Digital Economy in Southeast Asia: What Will It Take to Unleash Its Full Potential?
How can Southeast Asia capitalize on sustainability opportunities?
Despite the challenges, there are some ways Southeast Asia can capitalize on sustainability opportunities. First, Southeast Asian countries can still rely on their natural resources for a sustainable future.
Indonesia and the Philippines are the second and third largest producers of geothermal gas, a renewable energy source that will be in demand for decades to come. Singapore’s solar capacity has grown by more than 600% in the past five years, with Vietnam following closely behind. Southeast Asia offers wind and wave energy, potential sources of renewable energy.
Second, policies that encourage sustainable innovation, such as the ESP in Singapore, can create a favorable environment for companies to develop sustainable solutions. These solutions can then be exported to other markets, as was the case with Karana Foods and &ever.
Third, increased urbanization can be positive. With proper planning, it can provide an opportunity to build cities that are more sustainable and resource efficient. Singapore, the world’s most urban nation, is already doing its part to help the agricultural sector in the wider Southeast Asian region by boosting agritech venture capital, think tanks and digitization.
Finally, the creation of the Regional Comprehensive Economic Partnership (RCEP) between the 10 ASEAN countries and their five non-ASEAN partners has created the largest trading bloc in the world. This presents a unique opportunity to promote sustainable practices across the region, leading to greater global competitiveness.
Southeast Asia has the potential to become a global leader in sustainability, but it faces major challenges. However, these challenges are not unique to Southeast Asia, while there are inherent benefits unique to the region.
We may not see immediate results, but with the right policies, the region can seize opportunities to create a more sustainable future for all while taking advantage of one-off economic opportunities.
Related: The Future Value of ASEAN Countries for Entrepreneurs