Poised to emerge as the world’s fourth largest economy by the end of the decade, Asean can play a leadership role in the climate transition, provided the region enjoys political stability and common prosperity, and the world looks at “reconstituting its climate finance architecture”, a Malaysian global affairs expert has said.
Speaking at the fourth Malaysia edition of Unlocking capital for sustainability on Monday, Dr Mohd Faiz Abdullah, chairman and chief executive of the Institute of Strategic and International Studies (ISIS) Malaysia, said Asean cannot prioritise sustainable development without adequate climate financing from the Global North.
“There is a lot of hypocrisy going on. The Global North keeps on harping on the need for environmental consciousness, for net zero greenhouse gas (GHG) emissions and the promise of billions in support. While the promise has been great, the delivery is not there,” he said on a fireside chat on geopolitics and sustainable development with Eco-Business founder and chief executive Jessica Cheam.
“We also have not seen a tangible and solid change in the [world’s] financial architecture,” he added. ISIS Malaysia is a think tank which works closely with the government.
The Global North, which includes many of the world’s most industrialised economies, including the United States, United Kingdom, the European Union, Russia, and Japan, are historically responsible for the vast majority of GHG emissions that have driven climate change.
Under the principle of “common but differentiated responsibilities” in the Paris Agreement, these nations are expected to provide climate finance to developing countries for both mitigation (reducing emissions) and adaptation (coping with climate impacts) initiatives. But financial flows had fallen far short of the promised US$100 billion annually by 2020.
Malaysia’s political leaders have also often spoken up on the need for the Global North to provide financial support on the growing climate bills of developing economies.
Dr Faiz noted that pushing developing nations to meet sustainability targets without first delivering the promised climate finance is unjust and unrealistic. Globally, there is ‘fatigue’ which is caused by unrealised climate promises and expectations from the Global North. “Very sadly, it is the developing economies which are expected to do a lot more, yet are more financially stressed,” he said.
However, Dr Faiz believes that Asean as well as the wider Global South can tackle the “low hanging fruits” of driving the climate transition, set the tone for regional clean energy development, as well as shape a narrative that has been predominantly driven by the West where the need for state help is not emphasised enough. He said developing the foundations that will drive stronger capital investments does not work against business interests, but can help prevent social inequities.
A key recommendation is for Asean to front the development of a framework for climate-resilient infrastructure investment. “If the infrastructure is right, the roots will be there, and the branches will spread and grow upwards,” he said.
Other panellists at the annual forum hosted by Eco-Business echoed the view that there is room for the Global South to shape climate-related narratives. Yin Shao Loong, deputy director of research of Khazanah Research Institute who spoke on the closing panel, highlighted how climate adaptation finance, which is often overlooked, need to play a bigger priority for coastal nations in Southeast Asia.
He said much of the developing world including Asean is “pandering to the investment priorities of the Global North” which is focused on prioritising mitigation, with emphasis on carbon trading and the energy transition. But many of these developing economies are more vulnerable to floods, heatwaves and sea-level rise that require climate-resilient infrastructure in place.
“We have a long coastline. We have a population to protect. These are the big challenges we haven’t really spent enough time thinking through,” he said, adding that if countries don’t strengthen adaptation measures to deal with climate change, they will be left with “locked-in damages” that cannot be recovered for many years.
Adaptation finance gap
The Asian Development Bank (ADB) estimates that Southeast Asia needs over US$200 billion in adaptation investment between now and 2030 to protect its people, ecosystems, and infrastructure.
Failure to prioritise adaptation could lead to economic losses exceeding US$1 trillion annually across Asia by 2050 due to floods, droughts, sea-level rise, and other climate-driven disasters.
From left: Emeera Hashim, chief impact officer of IMPACTO, Dr. Ramy Bulan, research fellow and the director of the centre for legal pluralism and Indigenous law at University of Malaya and Yin Shao Loong, deputy director of research of Khazanah Research Institute on a panel discussion on climate resilience and adaptation moderated by Carmen Loo, public sector specialist at the World Bank Group. Image: Eco-Business
The ADB also estimates that every US$1 invested in climate adaptation can yield approximately US$4 in avoided losses or economic savings. However, these savings are often not counted as revenue in traditional financing models, said Emeera Hashim, chief impact officer of sustainability advisory firm IMPACTO.
She said adaptation projects don’t get as much investment because they protect the “quiet infrastructure” that everybody relies on, but nobody directly owes or directly profits from. These include clean air, a safe neighbourhood, work stability and continuity. Businesses should start redefining returns than merely looking at the financial risks of adaptation projects, she suggested.
“We take them for granted. It is only when these systems fail that businesses feel the effects,” she said.
Navigating superpower rivalry
The region must strengthen coordination and policy coherence in responding to shifting geopolitical headwinds, particularly where business and sustainability policy intersect, Dr Faiz noted.
He pointed out how Asean lacked unity and centrality when US President Donald Trump announced import duties on “Liberation Day”, with some countries such as Indonesia appearing to “wave the white flag” to seek trade concessions.
On Thursday, a day ahead of a deadline for countries to negotiate trade frameworks with the Trump administration unilaterally, the President signed an executive order for the imposition of revised tariff rates. The rates on Southeast Asian nations Malaysia, Indonesia, Cambodia, Vietnam and Thailand have all been lowered substantially to about 19 per cent.
The White House, however, had announced the lowering of its reciprocal tariff rate for Indonesia a week earlier, in what it described as a “historic trade deal” that will provide Americans with market access in the Southeast Asian country “once considered impossible”.
On the fireside chat, Dr Faiz called for Asean member states to take “more principled stands” when dealing with the superpowers and not capitulate to the “backyard bully”. In a statement, Malaysia’s Investment, Trade and Industry Ministry said on Friday that the revised tariff rate imposed by US on Malaysia was achieved without compromising the nation’s sovereign rights after it stood firm on various “red line” issues.
In the face of intensifying global power rivalries between the US and China that continues to define the geopolitical landscape and directly influence climate cooperation, trade flows, and clean energy supply chains, Asean must go “beyond traditional, time-bound categories of political security, economic, and socio-cultural community” in decision-making, Dr Faiz said.
Under Trump’s administration, the US has pulled out of the Paris Agreement twice and has intensified efforts to cut climate funding and expand fossil fuel development. On the other hand, although China has increasingly been showing global climate leadership as it dominates in solar panel production, electric vehicle markets, and battery innovation, Dr Faiz noted that, optics-wise, China still has a “credibility issue”.
“There is still the view that much of what constitutes the Chinese competitive edge is not really free market because there is the power and strength of the state behind it,” he said.
Balancing the “inequities” between the two giants is therefore important for Asean, and Malaysia, as well as other Asean nations, should strategically look to diversify their dependencies, suggested Dr Faiz.
For example, earlier this month, Malaysia Prime Minister Anwar Ibrahim had been invited to speak at the 17th BRICS Leaders’ Summit in Rio De Janeiro, and had called on the inter-governmental bloc to emerge as a strong and principled force amid unilateral tariff measures and protectionist policies.
Dr Faiz described it as a display of Malaysia’s “punching above its weight” and said Southeast Asian countries should look at wielding more of its soft power to navigate superpower rivalry.
Asean member states, including Indonesia, Malaysia, Thailand and Myanmar, are affiliated with Brics, a grouping originally formed by Brazil, Russia, India, China, and South Africa to promote cooperation among emerging economies. It has increasingly been seen as a platform for alternative economic and development strategies, particularly for the Global South.
Asean has the potential to demonstrate climate leadership, provided it can better manage regional geopolitical tensions, such as the recent Thai-Cambodia border conflict, Dr Faiz added.
Under Malaysia’s leadership, initiatives like the National Energy Transition Roadmap (NETR) and progress made on the Asean Power Grid offer promising pathways to address Southeast Asia’s urgent energy transition challenges.
Khazanah Research Institute’s Yin noted that Brics member states are exploring new ways to mobilise funds for climate solutions through the coalition, given the stagnation of global negotiations under frameworks like the United Nations Framework Convention on Climate Change (UNFCCC).
He added that Brics now has its own Development Bank, the New Development Bank (NDB) headquartered in Shanghai, which gives the bloc its own infrastructure to support cross-border climate projects, something Global South countries have struggled to access through traditional multilateral channels.
“Because we can’t get the solutions from the formal system. We must look for solutions elsewhere. We can’t afford the weight [of the problem], because the impacts are happening to us,” he said.
Unlocking capital for sustainability is an annual flagship event on sustainable finance organised by Eco-Business in partnership with UN Environment Programme (UNEP). The next regional edition will be held in Manila, Philippines, on 28 August 2025. Register here.
