This article first appeared in Digital Edge, The Edge Malaysia Weekly on November 14, 2022 - November 20, 2022
This month, leading climate scientists sounded the alarm as the irreversible impact of climate change reverberated across the globe, arguing that humanity is facing a “code red” as a result of inaction. Sure enough, for all the pledges made and agreements entered into, businesses and governments alike have made slow progress in enacting impactful change.
In response, entrepreneurs are racing to solve the collective challenge of climate change with the global climate tech industry growing over the years — with US$87.5 billion invested in the industry between 2H2020 and 1H2021 as we work towards a more sustainable future. Yet, despite being one of the most at-risk regions in the world for climate change, Southeast Asia has lagged behind even as extreme weather events accelerate. Singapore has warmed 80% faster than other Asean countries over the last seven decades and Malaysia experienced a “once-in-a-lifetime” flood last December that claimed the lives of 50 people and left thousands more homeless.
Southeast Asia’s sustainability agenda is lagging behind the rest of its global peers; however, future-facing technology can play a powerful role in fast-tracking green initiatives to help Asia close the gap.
Home to 15% of the world’s tropical forests, Southeast Asia’s rich biodiversity faces a 1.2% deforestation rate each year. Amid rising temperatures, climate experts warn of “rain bombs” that are expected to intensify exponentially for each degree of warming in the region. Such extreme weather will disrupt agricultural industries across critical production lines and supply chains. As a result, countries such as Malaysia — with key economic drivers in agricultural industries such as palm oil — are especially vulnerable to the impact of extreme weather events.
Against this backdrop, environmental, social and governance (ESG) initiatives are gradually gaining momentum across the region. Malaysia has made notable strides in sustainability with the Green Technology Master Plan outlining strategic proposals for green technology development to create a low-carbon and resource-efficient economy and plans to make ESG-focused programmes and projects a priority for Budget 2023.
Across the Causeway, the Monetary Authority of Singapore launched the world’s first grant scheme in support of green and sustainability-linked loans in 2020, further cultivating Asia’s sustainable financial market and its transition to a low-carbon future.
Yet, even with these initiatives, Southeast Asia’s decarbonisation efforts, like most other regions of the world, are still falling far short. In fact, the Intergovernmental Panel on Climate Change’s sixth assessment report (IPCC6AR) exposed Southeast Asia’s weak climate defence. The report highlighted the lack of carbon reduction strategies, its heavy reliance on climate finance that has yet to materialise and setting unrealistic goals as critical roadblocks to mitigating the effect of climate change in the region. In the light of this, no countries in the region are on track to meet the broader global target of reducing warming by 1.5°C by the end of the decade.
Despite climate impact on the most vulnerable communities in the form of floods and droughts, funds are not flowing to green projects that can make a real difference. Funds and efforts continue to be rightfully directed towards Covid-19 recovery efforts; however, this must not be at the expense of climate — governments must do both. With more than 23.1 million people now living in extreme poverty in Southeast Asia, many policymakers are putting important green initiatives on the backburner in favour of other urgent socioeconomic needs. However, ignoring climate inaction now will cost the Southeast Asian economy US$28 trillion in 50 years, which will further exacerbate socioeconomic inequality in the region.
Collectively, Asean countries represent the world’s fifth-largest economy, renowned for its vibrant start-up ecosystem and a strong economy that is expected to surpass global growth in spite of the dismal economic outlook. With a developing green sector set to be worth US$1 trillion by the end of the decade — and only a fraction invested thus far — governments and wider economic stakeholders must embrace this enormous opportunity.
While the region is an obvious tech and finance hub, countries have been slow to adopt market mechanisms such as voluntary carbon markets (VCM) — where only a few countries in East Asia have developed a marketplace for buying and selling carbon credits. Optimising Southeast Asia’s US$10 billion carbon offsets economic opportunity, Bursa Malaysia made a progressive leap to launch a VCM by the end of the year, enabling more accessibility to carbon offsets in the region. This not only provides businesses with pathways to neutralise the carbon they produce, but also presents a much-needed avenue to direct funds towards green projects in the region. Beyond that, Southeast Asia can extend its reach in innovation, green finance and climate tech to become a force behind driving technological solutions that can foster greater sustainable initiatives not only regionally, but also across the globe.
To achieve a greener future, the use of carbon credits to offset emissions is an essential first step to transition to cleaner business models. However, carbon markets still face unaddressed challenges that threaten their credibility such as double counting — where multiple parties lay claim to the same carbon emissions reduction — a lack of standardisation, and transparency.
One such technology that can address these challenges is blockchain. Known for its immutability, transparency and traceability, blockchain can instil more trust in the carbon market and raise and ensure standards in carbon neutrality certification. Today, these solutions are already readily available through MetaVerse Green Exchange’s (MVGX) Carbon as a Service (CaaS) — an end-to-end suite of products backed by proprietary technologies to help businesses verifiably achieve carbon neutrality.
MVGX effectively merges green finance with climate technologies — all while providing the underlying infrastructure that can track the integrity, performance and provenance of green projects and the carbon credits tied to them while accelerating accessibility to carbon trading solutions. Such technology can grow the market and redirect funds that will drive necessary green initiatives such as sustainable infrastructure and renewable energy.
As green solutions continue to evolve, it is no longer just a case of what can be innovated upon, but also levelling the playing field of funding accessibility for green projects in the region. Initiatives such as the Asian Development Bank and the UK government’s multimillion-dollar trust fund to scale green financing in Southeast Asia are a good start, but climate change needs to be treated as more than an issue for governments to solve. Change needs to come from the bottom up with education at the grassroots level upwards to policymakers, in order to break down the complexities, and address misconceptions about emerging technologies, while conveying the very-real value and importance that they hold in securing a more sustainable future.
Today, Malaysia already leads the region in sustainable sukuk issuance and records US$143 billion of ESG funds invested in Bursa Malaysia. Beyond investments, sustainability is at the core of Malaysian businesses with nearly all of the nation’s top public listed companies already having ESG strategies in place.
There is an undeniable urgency to accelerate efforts to counter climate change in Southeast Asia. While the road ahead in the fight against climate change is uncertain, leveraging innovative emerging technologies can bring us a step closer to achieving a more sustainable future. A collective effort from both the private and public sectors to level the playing field will be essential and can act as the impetus to drive greater climate action in the region at pace.
Michael Sheren is the president and chief strategy officer of MetaVerse Green Exchange (MVGX), a financial technology company providing end-to-end Carbon as a Service solutions
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