The Asean is not lacking in climate ambition, but it is lacking in climate finance.
A total of US$422.2 billion is needed to implement its climate solutions up to 2030. However, only up to US$6 billion a year of finance flows into the region, creating a massive finance gap in one of the world’s most climate-vulnerable regions that is also undergoing rapid industrialization.
Notwithstanding the failure of developed countries to fulfill their obligation under the Paris Agreement to provide sufficient means of implementation to developing countries – including many Asean Member-States – another important accelerator for increasing finance flows is setting the right policy environment for climate investments.
As the 2026 Chair of the Asean, the Philippines needs to set the tone for attracting and maximising climate investments. Its current policy environment provides its neighbours lessons on what to do – and what not to do.
The Philippine example
The Philippines has positioned its two main, recently-updated climate plans – the Nationally Determined Contribution (NDC) and the National Adaptation Plan (NAP) – as tools for attracting investments into the country. Yet neither are directly referenced in its 2026 Strategic Investment Priority Plan (SIPP), which identifies economic activities eligible for investment incentives.
While the SIPP, recently approved under Memorandum No. 47, lists as priorities NDC and NAP-relevant sectors such as agriculture and fisheries, renewable energy, and forestry – the latter which would be formally integrated into the upcoming 2026 NDC – omitting either of these plans shows a lack of synergy within the Philippine government’s own investment approach.
Instead of the plan explicitly incentivising investments for being NDC or NAP-aligned, their omission portrays insufficient familiarity and coordination among agencies about what are intended to be the foundational pieces of the country’s climate action for the next few decades. It also indicates that the climate lens is still not as important among the drivers of the nation’s long-term sustainable development.
Furthermore, the SIPP is not yet designed to make climate performance as an incentive metric. While it establishes priority activities and tiers, it is not enough to mention a project’s climate responsiveness. It must strengthen incentivization based on measurable outcomes, such as reduced emissions, avoided losses in assets, or proven additionality brought by the investment and project.
The challenges in measuring outcomes for the money spent has hampered a more complete assessment of the Philippines’ national budget allotted for climate action, especially those linked to the NDC and NAP. These are among the factors that increase risks that turn away potential investors, making climate projects less bankable.
The Philippines has also received more foreign finance on mitigation than adaptation, with over 70 per cent of its received Official Development Assistance in 2024 tagged for projects solely on mitigation; this is similar to the share across the Asean (88 per cent) in recent years.
Despite the country having a higher prioritisation for adaptation, issues pertaining to the bankability of adaptation projects prevent more investments from coming in. Said issues, from difficulty in measuring financial returns to higher perceived risks compared to returns, have also been documented by the Asean Secretariat.
What the Asean should learn
These experiences in the Philippines should inform the rest of the Asean in strengthening their climate investment policies. In the face of an increasingly-difficult global climate finance landscape, the importance of these actions increases, which should result in the just transition to a more low-emissions, climate-resilient region.
First is on policy coherence: climate policies must become investment policies. Investment priority lists of other Southeast Asian countries must identify as strategic industries the likes of renewable energy, resilient infrastructure, climate-smart agriculture, waste management, and nature-based solutions.
Second, incentives for incoming investments should reward the delivery of climate outcomes, aligned with the respective country plans such as their NDCs and NAPs; in the case of the Philippines, this must be reflected in its SIPP. Metrics for outcomes related to additionality for mitigation and adaptation – including ties to national development goals – must be required for proposed projects.
Third, strengthen the climate investment-relevant policy environment to make projects more bankable, especially for adaptation. Governments must properly allot its available public resources to reduce risks that lessen the attractiveness for climate investments, and help crowd in private capital instead of merely substituting for it.
Fourth, Southeast Asian countries can use both region-wide and domestic experiences to enhance the practical adoption of the Asean Taxonomy for Sustainable Finance and create bigger pools of investable projects. This would help in strengthening inter-regional collaboration in responding to growing risks imposed by the climate crisis, reducing vulnerabilities, and enhancing climate resilience.
Heading into COP31 and the 49th Asean Summit, both of which are happening this November, the Asean could establish a program creating a pipeline of climate investments with the criteria based on the alignment with respective country NDCs and NAPs and regional policies, including said taxonomy.
Next to the timely and sufficient provision of finance from high-emitting developed countries, the future of climate finance in the Asean would be largely determined on how governments make investments credible and investable. The Philippine example provides a crucial lesson: the most effective actions on climate investments rests on its leaders being sure of the kind of economy and society it wants to build.
John Leo Algo is national coordinator of Aksyon Klima Pilipinas, a nonprofit network of 40 civil society organisations like Greenpeace Philippines, WWF Philippines, and the Manila Observatory.
