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Sustainability heralds $1 trillion opportunity for Southeast Asia


Southeast Asia has fallen behind on the global sustainability agenda, although advancements in this space could be a $1 trillion economic opportunity for the region by 2030. This is according to a new Bain & Company report.

The backdrop is a global economy orienting itself towards a sustainable future. The European Union has set aside $600 billion for green investments over the next six to seven years, while the Biden administration in the US plans to channel a staggering $2 trillion into clean energy, infrastructure and automobiles over the next four years.

Closer to home, China has funneled nearly $3 trillion into renewable energy investments over the last year. Globally, Covid-19 has spurred on this trend. With many economies devastated in the wake of the crisis, the battle cry is to “build back better” – in many cases with a focus on sustainability – and trillions more have been committed to the cause.

Southeast Asia lags behind on sustainability

In Southeast Asia, the wheel is turning slowly, if not backwards. Bain & Company includes Thailand, Vietnam, Malaysia, Brunei, Singapore, Philippines, Indonesia, Myanmar, Cambodia and Laos all within this regional characterisation, pointing out that none of these markets ranks above 40 in the global Sustainable Development Goals rankings. 

The region performs badly across all sustainable metrics. Carbon emissions are expected to jump 60% by 2040. More than half of the mismanaged plastic waste across the world will come from Southeast Asia in 2025, while the wastewater treatment rate in the region is the lowest in the world – nearly 90% of the region’s wastewater is left untreated.

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Renewables have less than 15% market pentrations in the primary energy supply market, while the annual rate of deforestation – 1.2% – is higher than any other tropical region around the world. What all these figures reflect is insufficient priority towards the sustainability agenda so far.

On the mend

What the numbers don’t yet reflect are the concerted efforts now emerging to bring sustainability to the region – featuring governments, corporates, investors and consumers. Bain & Company highlights some of these initiatives.

Sustainability initiatives gaining momentum in Southeast

ASEAN governments have agreed on a target for 23% renewable energy use by 2025, and more than 30% by 2050. Sustainable investments are on the rise too. In fact, sustainable assets made up more than 40% of all deal value in Southeast Asia in 2018, amounting to more than $6 billion. In 2010, this share was at 1%.

Consumers are also on board, with many expressing a willingness to pay more for sustainably sourced produce. Facilitating these shifts is the rapid tech advancement ongoing in the region: big businesses are using green technology to decarbonise their operations while small businesses and startups are working on innovative digital solutions for sustainability.

While there is a long way to go, all these efforts add up to a push in the right direction. “The challenges to change are still considerable for many economic sectors; however, Southeast Asia has proven that it can transform quickly when needed. For example, the region was not an early mover in digital transformation but accomplished that transition at an impressive pace,” noted Dale Hardcastle, a partner at Bain & Company in Singapore.

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A $1 trillion opportunity

Provided that the sustainable agenda can take centre stage, the economic possibilities are endless. Southeast Asia is home to 20% of the world’s biodiversity, 10% of the world’s population and 3% of the global landmass. If green living were to take hold in such an economy, it could take the lead on global sustainability.

Economic opportunities from sustainable practices

The focus areas are clear. Resource extraction and energy generation are wasteful in the region, and must be decarbonised and consumed judiciously. Agricultural practices are outdated and inefficient, and must be aligned with global regenerative best practice. The region is fast becoming a manufacturing hub – a viable alternative to China in some cases – and supply chains need to be organised responsibly. 

In daily life, cities are crowded, congested and polluted. Urban planning needs to change with a focus on affordable green housing, and low-mission transport systems. Driving this change, governments must put clear incentives in place for low-carbon practices.

The economic potential from all these changes is monumental. By 2030, Southeast Asia could generate $1 trillion in economic opportunities each year. “This includes value from the emergence or growth of new products and sectors arising from sustainable production and consumption, as well as savings from resource efficiencies of using less to produce more,” explained Gerry Mattios, an expert partner at Bain in its Singapore office.

In the “build back better” paradigm, many economies in the region are likely to take up the sustainability mantle. Bain & Company itself recently established a Global Sustainability Innovation Centre in the region, where experts from the firm can work with businesses and government bodies in the region to overcome barriers to sustainability.

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