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Sustainable Infrastructure: Accelerating Southeast Asia’s Journey to Net-Zero

While climate goals have been on the minds of nations in recent years, the pace of global smart city initiatives towards a net-zero future has been greatly accelerated, particularly by the outbreak of COVID-19.

In light of the upcoming UN Climate Change conference in November 2021, it is important to note that while climate goals have been on the minds of nations in recent years, the pace of global smart city initiatives towards a net-zero future has been greatly accelerated, particularly by the outbreak of COVID-19.

This year, many Southeast Asian nations have stepped forward with more ambitious goals to lower carbon footprint. It is not a coincidence that this comes during the COVID-19 pandemic – many nations are seeing the opportunity to “build back better” and they are also seeing new growth areas that sustainability can bring about. Aiding this is the cost of renewable energy hitting its lowest in the past few years.

Sustainable Infrastructure – The Backbone of Smart Economies

Infrastructure plays a bigger part in a country’s sustainability efforts than some realise. To truly capitalise on the benefits of smart infrastructure, there is a need to ensure buildings are developed not just to weather elements of climate change, but also built in a holistic manner that includes the city’s economic, financial, social, environmental, and institutional goals. This is also known as the Environmental, Social and Governance (“ESG”) aspects of infrastructure. These include:

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Sources: KPMG’s Global Infrastructure and Climate Change Discussion Document (October 2020); United Nations Sustainable Development Goals (“UN SDG”); and Infrastructure Australia.

The Keys to An Effective Sustainable Infrastructure Revolution

Going one step further than simply incorporating ESG principles into sustainable infrastructure plans is honing the ability to leverage market sentiment, investors, corporate agendas, and the public sector to achieve measurable outcomes and tangible change.

Market sentiment and investors

KPMG’s recent Survey of Sustainability Reporting 2020 has found that an increasing number of investors, asset managers, and ratings agencies are incorporating ESG principles into their investing mandates, portfolio holdings, and assessment of corporate performance and risk. They have also started to identify and track more complex ESG considerations in debt and equity markets for infrastructure opportunities. In turn, infrastructure developers and operators are striving to embed ESG criteria in their projects and across their asset lifecycles to attract investor and lender interest.

Corporate agendas

With the need to rebuild organisations for a new and sustainable post-COVID economy, business leaders are realising the ‘E’ in ESG can no longer be glossed over, according to KPMG’s 2020 CEO Outlook survey. Corporate agendas have begun to reflect risk identification, assessment, and mitigation as top priority areas as companies look to quantify the financial, physical, regulatory, reputational, and transitional risks of climate change-driven impacts on assets and businesses.

Public sector

Governments and intergovernmental organisations are also increasingly taking the lead in setting clearly defined criteria and policies to guide ESG investment priorities and programmes as well as to evaluate new development opportunities. This has led to majority of major companies (over 70%) setting and disclosing carbon targets, particularly those in the automotive, mining, utilities, technology, media, and telecommunications industries.

Existing infrastructure pipelines have pivoted to sustainability-focused assets with more governments widening the availability of ESG grants and subsidies for sustainable projects. Spurring the momentum of sustainable project development is the accessibility of transition finance and blended finance — a structuring approach that enables public and private investors with different objectives to invest alongside one another. This nurturing of partnerships between governments and corporations has boosted the acceleration of growth in this area, further driving the sustainable infrastructure agenda.

Building Cities of the Future

The way climate change has influenced the way we plan, finance, build and operate infrastructure assets has opened doors for both existing and new players to a goldmine of new innovations that can and will power the cities of the future.

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Source: KPMG’s Global Infrastructure and Climate Change Discussion Document (October 2020)

Looking ahead, some possible manifestations of sustainable infrastructure are:

Real-world success stories around Asia also provide vital learnings on project planning and implementation.

Transitioning to a Smarter Asia

Even as the global push for sustainable infrastructure accelerates, many challenges lie ahead that could potentially derail implementation efforts. Hence, three factors are key in managing the transition:

Engineering Net-Zero Success for Southeast Asia

Green infrastructure is more than just climate-friendly buildings and networks. It involves thinking about how to build sustainability into daily living while creating innovations and alliances to make it happen.

While closing the distance to a net zero future might seem like a daunting process, the collective effort of stakeholders in Asia’s private and public spheres is already triggering shifts in policies, mindsets, and investment models. From here on, the coordinated efforts between the governments, businesses, and industry leaders in the region will play a critical role in eking out the path towards smarter, greener cities.


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