Asean may be forced to choose between economic growth and climate if both are not decoupled: Ravi Menon

KUALA LUMPUR, 21 JULY 2026 —

SINGAPORE — Southeast Asia stands at a crossroads where economic growth remains heavily tied to fossil fuels, leaving the region vulnerable to escalating climate risks if emissions are not decoupled from development, warned Ravi Menon, Singapore’s Ambassador for Climate Action.

As incoming chair of the Association of Southeast Asian Nations (Asean) next year, Singapore plans to focus on three critical areas—carbon markets, nature-based solutions, and climate adaptation—to help the bloc navigate these challenges. Menon emphasized that while advanced economies have managed to grow while reducing emissions, Southeast Asia’s trajectory remains precarious.

A Region Under Pressure The climate crisis is intensifying in Southeast Asia, one of the world’s most vulnerable regions. By mid-century, the region could face an additional 60 days of extreme heat annually, alongside sea-level rises exceeding global averages. Menon noted that the region currently experiences around 100 climate disasters each year, impacting 80 million people annually. These impacts disproportionately affect vulnerable communities, smallholder farmers, and low-income households.

Energy demand in Southeast Asia is projected to double by 2040 as economies expand. Yet, this growth must occur alongside rapid decarbonization and adaptation to worsening climate impacts. The dual challenge is compounded by structural obstacles in financing and implementing solutions.

Carbon Markets: A Fragile Foundation Carbon credits, a key tool for offsetting emissions, have struggled with integrity issues in recent years, undermining trust in voluntary carbon markets. High upfront costs, uncertain revenue streams, and long payback periods have deterred investment in many projects.

Menon stressed that abandoning carbon markets is not the solution. Instead, he called for rebuilding integrity through robust verification of emissions reductions, conservative baselines, and rigorous additionality testing. Singapore is collaborating with partners like the Integrity Council for the Voluntary Carbon Market to strengthen supply, drive demand by purchasing Paris-aligned credits, and guide corporate buyers on responsible credit use.

Nature-Based Solutions: Underfunded and Undervalued Nature-based solutions, such as mangrove restoration and reforestation, are severely underfunded in Southeast Asia. The region requires an estimated US$54 billion annually by 2030 to meet its needs but currently receives only US$8 billion. The shortfall stems from unpriced ecosystem services, a lack of bankable projects, and difficulties in measuring outcomes.

To unlock investment, Menon proposed tailored measurement solutions for Southeast Asia’s ecosystems, innovative financing mechanisms like blended finance combined with carbon credits, and demand aggregation through buyer coalitions and offtake agreements. His vision of success? Making a mangrove restoration project as financeable as a new industrial park—a goal Asean must collectively pursue.

Adaptation Finance: A Daunting Gap Climate adaptation financing in Southeast Asia remains critically insufficient. Between 2021 and 2022, just US$34 billion flowed into the region, despite estimates suggesting a need for up to US$400 billion annually. The gap persists because adaptation projects often yield diffuse benefits, lack clear returns, and are treated as public goods typically funded by governments.

Menon argued that adaptation requires a systemic approach involving governments, corporations, and financial institutions. Developing robust national adaptation plans that frame projects as investment opportunities could attract capital markets. Corporate transition plans should integrate climate resilience, while financial institutions must incorporate climate risk into lending decisions. Blended finance structures, which blend philanthropic or concessional capital with private investment, could help de-risk adaptation projects and catalyze private capital.

Regional and Global Implications The stakes extend beyond Southeast Asia. As a major emitter and a hub for global supply chains, the region’s climate trajectory influences international climate goals. Menon’s remarks underscore the urgency for Asean to align economic policies with climate commitments, particularly as global investors increasingly scrutinize environmental risks.

For Malaysia, a key Asean economy, the challenges are acute. The country’s heavy reliance on fossil fuels, particularly in energy and industry, mirrors broader regional trends. Yet, Malaysia has made strides in renewable energy, with targets to increase solar capacity and reduce coal dependence. The government’s upcoming policies on carbon pricing and green financing will be critical in shaping its transition.

Stakeholder Perspectives Industry leaders at Ecosperity Week echoed Menon’s concerns. A representative from a regional energy firm noted that while decarbonization is a priority, the transition must be economically viable to avoid stifling growth. Meanwhile, a sustainability analyst highlighted the need for clearer regulatory frameworks to attract private investment in nature-based solutions.

Governments across Asean are also grappling with balancing development and climate goals. Indonesia, for instance, has pledged to reach net-zero emissions by 2060 or sooner but continues to expand coal power to meet energy demands. The Philippines, another climate-vulnerable nation, faces mounting pressure to protect coastal communities from rising seas and intensifying storms.

The Path Forward Menon’s call for action reflects a broader recognition that Southeast Asia cannot afford to delay climate investments. The region’s vulnerability demands not just incremental steps but systemic transformation in how economies grow, how ecosystems are protected, and how communities adapt.

As Asean prepares to take the chair next year, Singapore’s proposed focus areas—carbon markets, nature-based solutions, and adaptation finance—offer a roadmap. Yet, success will hinge on collaboration, innovation, and political will. The alternative—inaction—risks locking the region into a cycle of climate disasters and economic instability.

For now, the message is clear: Southeast Asia must decouple growth from emissions, or risk having to choose between the two. The time to act is now.