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Given the growing international pressure to mitigate climate change and increasing fears around climate impacts, expectations of continued investment in fossil fuels in Southeast Asia’s power sector appear puzzling. This paper explores how power sector investors perceive climate-related risks and how they factor these risks into investment decision-making.
The authors first seek to explain why countries in Southeast Asia are making plans for – and investors are continuing to invest in – fossil-based power generation instead of renewable or clean generation options, and second, what it would take to substantially shift investment from fossil generation into renewable options in the region. The authors carried out interviews with 17 industry experts working in Southeast Asia’s power sector.
Overall, the results from the analysis suggest that there is currently a significant gap between the need to integrate climate risks within investor decision-making and the way these risks are currently being integrated and addressed in the Southeast Asia power sector. The analysis shows that climate risk is either not a significant factor, ignored in light of other concerns, or only superficially integrated into decision-making. The authors discuss the factors behind these findings and question the assumption that risk is one of the main drivers of investment decision-making. They also draw attention to other important factors, seldom reviewed in the literature, that lead investors in the power sector in Southeast Asia to either actively avoid, downplay, or ignore the potential impact of climate risks.
The results of this research point to an urgent need for action targeted at energy-sector investors in order to:
Initiative / Our work on global finance looks at how the global financial system supports or undermines societal transitions.
Media coverage / SEI Research Fellow Sara Vigil talks to PBS News Hour on how climate change affects migration.
Project / The project will identify capacity gaps related to creating an enabling environment for inclusive finance flows, with specific attention to adaptation finance.
Project / The USAID Clean Power Asia project was an initiative to facilitate investments in environmentally friendly, grid-connected renewable energy in Southeast Asia.
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