Energy transition investment opportunities in APAC

The APAC region houses 60% of the world’s people, but its greenhouse gas (GHG) emissions have historically been significantly lower than its population. In recent years, however, as its economies have grown and rapidly industrialised its GHG emissions have soared and APAC now emits more than 50% of global GHG emissionsⁱ.

While most countries in the region are shifting towards a net-zero economy there are vast differences between individual countries, creating a diverse, and attractive investment opportunity according to Ignace Nguyen, Client Portfolio Manager for Mirova division in Singapore*: “Studies show that Asia is projected to account for the largest share of the global opportunity set from climate activities by 2030, potentially unlocking an estimated USD4.3 trillion of incremental annual business opportunityⁱⁱ.

In this Q&A we discuss the investment opportunities and challenges in the Asia-Pacific’s energy transition with some of the team members from Mirova division in Singapore*.

• Nicolas Hayon, Investment Director, Mirova division Singapore
• Ignace Nguyen, Client Portfolio Manager, Mirova division Singapore
• Priyanka Mehrotra, Senior Investment Manager, Mirova division Singapore
• Camille Barré, Impact and ESG Specialist, Listed Assets, Mirova division Singapore

Q. What APAC investment opportunities are you most interested in?

Priyanka Mehrotra: “Developing Asia faces huge clean energy investment gaps – the Asia Pacific region has a shortfall of USD800 billion in climate financingⁱⁱⁱ. The private sector will therefore need to make a major contribution toward the tremendous climate investment needs in emerging market and developing economies.”

Nicolas Hayon: “From the private asset angle, in developed markets, we see opportunities in Australia, where a massive energy transition is underway. Here we are able to leverage our existing partners and network from our team’s 20 years of operations in Europe to facilitate market entry. According to Australian Energy Market Operator (AEMO) recent estimates^iv reaching the 82% target of renewable energy in the electricity mix by 2030 (from 39% at the end of 2023) calls for tripling utility scale renewable energy capacity and almost quadrupling the firming capacity.”

Camille Barré: “On the listed assets side, given Asia’s momentum on multiple energy-transition related technologies, the impact investment strategies go beyond renewable energy and also target clean mobility and energy storage solutions. Further, we note some companies are showing significant impact through agricultural innovations in countries such as Thailand and Malaysia.”

Ignace Nguyen: “Hard-to-abate heavy industrial sectors are significant contributors to Asia’s carbon profile and green hydrogen is emerging as a key source of energy in decarbonising such sectors. It is encouraging to see many Asian countries (China, Japan, South Korea, Australia, Singapore) committed to national hydrogen strategies to drive the energy transition across the industrial, power and mobility sectors. Furthermore, the AI-driven power demand will be a structural tailwind for the expansion of renewable energy in years to come. As many data centre owners and operators have decarbonisation and net zero targets in place, we expect a large portion of the incremental power needs for AI will be sourced from zero or low-carbon technologies.”

Q. What are the key challenges you see in the energy transition?

Camille Barré: “Without strong initiatives, greenhouse gas emissions in Asia are projected to double by 2050^v. The region faces highly dynamic urban trends, with cities & population growing significantly. Moreover, the continent exhibits high climate vulnerability, Asia being the region where the population is most exposed to negative impacts due to climate change. Furthermore, as countries are at different stages of development, tackling these challenges is complex, but we cannot address climate mitigation without supporting the energy transition in Asia.”

Priyanka Mehrotra: “Emerging markets in Asia are still heavily reliant on coal as a source of energy. In most of these countries, coal makes up more than half of power generation capacity. This is coupled with high economic growth in the region, which feeds further energy needs. Thus, a switch to cleaner energy sources must occur in tandem with this economic growth, and at a large scale, to counter the region’s carbon emissions.”

Ignace Nguyen: “The Asia-Pacific region stands at the epicentre of the climate crisis, but also holds the solutions in its hands. The region accounts for more than half of global wind and solar generation capacity^vi and can drive transformative change to decarbonise the global economy.”

Nicolas Hayon: “This is precisely why Mirova decided in 2021 to establish a division in Singapore*. We wanted to be at the forefront of what represents both an immense challenge and a great impact investment opportunity. It encompasses both developed and emerging markets, with different risk/return profiles. The diversity of the region pushed us to invest and build a team and we now have 10 professionals on the ground, combining investment functions on private and listed assets and sustainability research capacities."

Read Mirova's full white paper on the Energy Transition in Asia.