In a few days’ time, Singapore is set to welcome Asia’s top players in climate finance to map out “practical” pathways to meet its 2030 decarbonisation goals.
Convened by state investor Temasek, executives from prominent financial institutions like BlackRock, HSBC and SMBC will be present. Earlier this year, BlackRock and SMBC quit the United Nations-convened net-zero alliances for asset managers and banks respectively, while HSBC pushed back its climate targets by two decades.
Representatives from two of the largest carbon project registries, Verra and Gold Standard, will also be in attendance, alongside major watchdogs Integrity Council for Voluntary Carbon Markets (ICVCM) and Voluntary Carbon Markets Integrity Initiative (VCMI), as well as project developers like South Pole.
Following a slump in carbon markets and integrity concerns, revitalising the offsetting business was a key focus of last year’s summit.
But this year, green pragmatism is set to take centrestage, amid growing setbacks to climate policies and trade tensions, which have left many Asian countries – among the worst hit by United States’ so-called reciprocal tariffs last month – scrambling to buy American natural gas to address trade imbalances with the world’s largest economy. Climate change has also barely featured on the campaign trails in recent elections across Canada, Australia and Singapore – overshadowed by more immediate cost of living concerns.
“With a growing focus on energy security and affordability, it’d be much easier to take the foot off the pedal on decarbonisation, but we need to stay the course. We need to lean in, not only to avoid the worst consequences of climate change, but also to seize the opportunities from the structural tailwinds,” said Kyung-Ah Park, Temasek’s chief sustainability officer, adding that macroeconomic and geopolitical headwinds threaten to make mitigation solutions more expensive.
But decarbonisation solutions – which the first day of the conference centres around – need not always be “high-tech, high-cost” technologies, said Heidi Yip, head of sustainable and transition solutions, Asia ex-Japan at BlackRock.
She cited the example of US thermal battery maker Antora Energy, which a BlackRock-Temasek joint venture led a US$150 million funding round for last year. The startup is producing a new class of batteries that can store renewable energy as heat in solid carbon at a fraction of the price of traditional lithium-ion batteries.
“There are some solutions that are quite feasible in this region. All we need to do is to make sure we channel capital into these technologies to drive scale and adoption,” said Yip.
Meanwhile, Temasek-owned investment platform GenZero’s chief executive Frederick Teo urged for the economic case for climate action to be made clearer at the upcoming conference.
“We are sometimes stuck with this paradigm when it comes to climate solutions, where we are always talking about the ‘green premium’. But sometimes there is a ‘green discount’,” he said.
For instance, renewable power is set to be the most cost-effective way of meeting growing energy demand, driven by artificial intelligence, data centres and other new engines of growth, said Teo. Doubling down on renewables, amid tariff wars, will likely also cut import costs and reliance on unstable regimes like the US, energy experts have said.
“Today, renewables in certain places can even be cheaper than coal and other fossils. Therefore, the expansion into renewables and climate solutions is driven from an economic, rational decision-making process; not just an ideological belief. That is an important nuance in the narrative that will allow us to continue on this journey,” said Teo.
“We need to make sustainability sustainable today, not some time in the future. So we’re going to see a pivot away from values to a greater focus on value.”
Teo added that financiers and regulators will need to think about “practical ways that can encourage action in the midst of uncertainty”, where there can often be an overwhelming inclination towards paralysis and taking a “wait and see” approach to capital-intensive investments.
“The only way to avoid doing anything wrong is to do nothing. That is the problem that we face in the climate agenda as we are running against a clock. Inaction is actually a far greater danger than trying things out and sometimes getting it wrong, but at least we are trying,” said Teo.
Financiers need to think of ways to reduce the cost of capital, to ensure that there are sufficient returns from injecting private financing into solutions, instead of relying on the government to fund such projects, given that many will have competing priorities for funding in the next few years, he added.
Similarly, Teo expects the profitability of companies, alongside funds previously set aside for spending outside of existing obligations, to come under increasing pressure. Therefore, if regulators are not mandating demand for climate action, through the use of carbon credits, carbon taxes or emission trading schemes, companies are less inclined to invest in it, he said.
Asia’s policymakers also need be step in to provide more policy certainty, which investors rely on to forecast an asset’s value in order to deploy capital, said BlackRock’s Yip.
“What we hope to see, coming out of this year’s Ecosperity conference, is much more commitments and visibility of plans by regional governments and regulators,” she said, citing how certain countries like Australia, Japan and the United Kingdom are making climate financing commitments in Southeast Asia.
“These are important signals, not just about long-term intent to remain plugged into the development of this region, but to lower the cost of capital for key developments that need to happen, and for investors to come in and participate in the capital stack.”
