- Energy efficiency regulations in Malaysia and Singapore have led to green data centers becoming the biggest investment boost in Southeast Asia, according to a new report.
- Yet the region remains “severely off track,” with only 1.5% of the green financing needed for countries to meet their 2030 emissions targets.
Southeast Asia is expected to see a significant increase in green investment in 2023, boosted by green data center projects, although funding remains short, according to a report released on Monday.
Analysis conducted by Bain & Company, GenZero, Standard Chartered and Temasek found that $6.3 billion of green investment flowed into the region, an increase of 21% year-on-year.
The report says that renewable energy will continue to be the region's main green investment theme in 2023, while green data center projects supported by efficiency policies in countries such as Malaysia and Singapore will be the largest It is said to have led to growth.
The emergence of new data-intensive technologies, such as generative AI, is causing demand for data centers to skyrocket, leading to warnings about increased energy consumption.
According to the International Energy Agency's January report, the energy consumption of the AI industry is expected to to It will grow at least 10 times between 2023 and 2026.
Malaysia and Singapore pave the way
Malaysia and Singapore are among the Southeast Asian governments that have helped drive large-scale investments in these green data centers aimed at becoming more energy efficient and reducing dependence on fossil fuels.
Malaysia raised large-scale green financing of more than $500 million for at least two data centers last year, according to a report on Monday. Funding for these projects helped the country achieve a 326% increase in green investment compared to 2022, the largest year-on-year jump among countries in the region.
Meanwhile, Singapore's largest telco Singtel has announced a five-year investment of S$535 million ($401 million) aimed at improving the efficiency of all its data centers, including an upcoming 58MW green data center that began construction last year. ) secured a green loan.
The move comes after the Singapore government announced sustainability standards for data centers operating in tropical climates. This small city-state has become a hotspot for data centers and cloud service providers.
Kimberly Tan, head of investment at GenZero, said: “Countries that take the lead in developing decarbonization roadmaps through clear policy frameworks, supportive regulations and concrete financing plans are better positioned to attract private investment. He will stand.”
Despite these efforts, Singapore's overall green investment fell to $900 million in 2023 from $1.2 billion the previous year.
More needs to be done
According to the report's authors, the increase in regional green investment signals a positive shift in trends, and while there are encouraging signs for investment in green data centers, there is still a long way to go to meet key climate goals. He says more is needed.
According to the report, reaching national contribution targets by 2030 will require cumulative investments of around $1.5 trillion in the energy and nature sector. But the report says only 1.5% has been invested so far, putting many countries at risk of not keeping their commitments.
“Southeast Asia remains far off track, so we believe it is imperative that countries, companies and investors accelerate their efforts,” GenZero's Tan said.
He added that renewable energy accounts for less than 10% of the region's energy supply, and that subsidies for fossil fuels are about five times higher than investments in renewable energy. Green investment in electricity in the region fell by 14% year-on-year for the second year in a row.
“There is a real gap between what most people believe and real progress on the ground,” said Dale Hardcastle, director of Bain & Company's Global Sustainability Innovation Center. There is,” he said.
However, he added that despite “structural challenges” in Southeast Asia, there is tremendous potential to accelerate the energy transition and build a green economy through initiatives such as blended finance.
Additionally, the report called on governments to promote policy incentives and regional cooperation, as well as focus on proven and deployable green technologies. He added that these efforts could generate $300 billion in business annually by 2030.
In the region, Indonesia had the highest amount of private investment in green projects, closely followed by the Philippines. Meanwhile, Laos saw the second-highest increase in investment at 126%, thanks to foreign investment in renewable energy projects.
Other key investment drivers in Southeast Asia include investments in waste management, such as water treatment and plastic recycling.