Southeast Asia’s once in a lifetime opportunity to lead the building of a green economy

Courtesy of Bain & Company

By Gerry Mattios & Al Na Chiangmai Na Chiangmai

Covid-19 has interrupted numerous business initiatives, as countries around the world race to address the pandemic. But the resulting stimulus programs and massive changes to the way many businesses operate—and the ways in which consumers shop—now present a unique opportunity to accelerate the global push toward a green economy.

Southeast Asia is now picking up the pace in this race to sustainability. With nearly $1 trillion in untapped potential, an availability of new funding sources, and a global willingness to find a new normal, the region has never been in a better position to embrace sustainable growth through tangible, collective action.

Bold changes offer significant opportunity

Not since the industrialization boom in the early 1960s has this region had the opportunity to make bold changes on such a scale. This new green revolution offers a more significant opportunity for innovation and growth than many business leaders have seen in their lifetimes.

Although the region has traditionally lagged green economy investments in the European Union and China, Southeast Asia has the potential to transform quickly. These opportunities include:

•                 Sustainable energy and resources: Shifting to sustainable energy consumption and resource extraction presents $270 billion in annual economic opportunities by 2030.

•                 Sustainable and healthy food systems: Embarking on transformational pathways in the food and agriculture sector will allow companies in Southeast Asia to capture $205 billion in opportunities annually by 2030 and enable the region to produce nutritious food more sustainably.

•                 Efficient industries and logistics: Establishing efficient industries and logistics offers a $200 billion opportunity by 2030.

•                 Green and connected cities: Transforming urban centers into green and connected cities offers $185 billion in opportunities by 2030.

•                 Green financing: Green financing is an important enabler to support growth and spark the transformation of the green economy.

Businesses can take advantage of changing infrastructure

Economies worldwide are incentivizing businesses to address the Covid-19 pandemic and promote build back better initiatives, many of which support or grow sustainable industries. Add favorable interest rates and stimulus opportunities, and it’s an excellent time to fund sustainable changes as businesses and economies rebuild. For example:

•                 China is implementing a New Infrastructure stimulus to boost green growth. In addition to the $2.6 trillion in investments it made in renewable energy from 2010 to 2019, the country unveiled an ambitious five-year economic plan in 2020 that prioritizes innovation and technology in its sustainability initiatives.

•                 South Korea’s Green New Deal, announced by President Moon Jae-in, seeks to invest $62 billion over the next five years as part of efforts to achieve a carbon-neutral economy by 2050.

•                 Infrastructure is a priority under the Philippines’ $160 billion economic recovery plan—a significant impetus to creating projects, investment opportunities, and green jobs.

•                 The new U.S. administration has indicated a desire to prioritize both national and global sustainability efforts.

The Singapore Green Plan 2030 has set ambitious goals across for the next 10 years. This whole-of-nation plan involves leadership not just from the Ministry of Sustainability and Environment, but also from the Ministries of Education, National Development, Trade and Industry, and Transport. Plan initiatives include the following goals:

•                 Harness technology in urban planning so that 80% of buildings will be green over the next decade.

•                 Transform farming, with the goal of locally producing 30% of nutritional needs.

•                 Incentivize the use of electric vehicles, discouraging the internal combustion engine and expanding the cycling network.

•                 Issue green bonds on public infrastructure projects.

•                 Encourage businesses and households to reduce electricity and water consumption.

•                 Plant 1 million trees.

At the same time, the Covid-19 pandemic has exposed gaps in traditional systems, disrupting supply chains at the peak of lockdown periods. Although challenges to change are still considerable for many economic sectors, many others are facing inflection points. International bank financing is waning for the construction of coal plants to general energy; consumers across the region are pushing back on plastic waste and other environmental concerns.

Now is the time to reimagine growth and operational efficiency and to adopt a new perspective on sustainability. 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.

A focused transition to a green economy offers Southeast Asian governments and businesses the chance to disrupt inefficient paradigms and pursue transformation.

Unlocking the green economy is a key to wider growth

Adopting green practices will also help the region meet wider environmental, social, and governance (ESG) ambitions and deliver societal benefits such as preserving the earth’s natural ecosystems and social inclusivity—which also underpin increased growth. Unlocking the green economy could be a key to economic growth in a wide range of sectors.

For example, Bain & Company, in coordination with the Singapore Economic Development Board (EDB), recently launched a Global Sustainability Innovation Centre (GSIC) based in Singapore. The GSIC will support Bain’s deep expertise in sustainability in the region as we help companies reach their ESG goals and pioneer innovative solutions to accelerate corporate sustainability, tackling some of the planet’s biggest challenges.

Businesses have the opportunity to boldly commit to a sustainable, profitable future by decisively developing ambitious, well-resourced plans. Another reason to move rapidly: The skills necessary for rebuilding in a green economy are already in high demand. Now is the best time to locate, develop, and acquire that talent, which will only become more difficult and expensive to find moving forward.

Southeast Asia’s journey toward a more sustainable future has begun. The question now is how great the rewards will be and who will secure them.

Gerry Mattios is a Partner and Co-Director of Bain’s Global Sustainability Innovation Center based in Singapore. Al is a Partner based in Bangkok.