Welcome to DealStreetAsia’s new monthly newsletter on developments and insights focused on the climate and impact investment sectors across Asia Pacific.
In this inaugural edition, we have some quick takes from investors and industry insiders on what could be expected in global climate action as the US pulls back; and the most recent climate deals in Southeast Asia.
State of the climate
Since the re-election of Donald Trump to the White House, there has been a spate of executive actions and policy changes – from the US withdrawing from the Paris Agreement to freezing or attempting to claw back the record billions in funding and other measures targeted at cutting the US’ emissions by 40% by 2030.
What are the implications of these actions that essentially reverse the course of US climate action efforts? And who will, or can, step up in climate action leadership?
On the face of it, the “Putting America First” doctrine raises the question of whether a global power’s pullback in leadership and funding could slow the pace of progress toward emissions reduction, and if it could prompt others to follow suit, or at least fuel climate skepticism as the issue becomes more politicised.
Already, Mafalda Duarte, the head of the Global Climate Fund, the UN’s largest climate vehicle, has appealed to other world leaders after the US rescinded $4 billion in pledged funding. Top banks – from the biggest Wall Street players to Canada’s biggest banks and Australia’s Macquarie – and asset managers, including the world’s largest BlackRock, have exited climate-focused alliances.
However, the alliances coming undone are more likely due to their increasingly cumbersome regulations, and should not be seen as the whole climate action industry falling apart, one observer says.
Regardless, the climate problem is real, and there is value in solving it, as one investor puts it. “Others will step in not because the US has pulled back, but because there is money to be made.”
Indeed, there have been years of investment in climate action, especially renewable energy infrastructure and innovation. IEA estimated a record $3 trillion invested in energy infrastructure in 2024; two-thirds were into renewables. (Chart source: IEA)
And, billions of dollars have come from the biggest oil companies, who had set aside a percentage of their capital expenditure for renewables, some under duress, and who would likely loathe seeing that account for nought. [Shell and BP, for instance, each spent 12% of total capex in 2021 on renewables and low-carbon activities.]
Meanwhile the UK, for instance, has set the most ambitious emissions reduction targets yet. Prime Minister Keir Starmer said at COP29 that the UK will aim for a higher 81% cut in emissions by 2035, noting that the target was key to the country’s national security, energy independence, and economic stability. “This is a huge opportunity for investment, for UK businesses, for British workers if we act now to lead the world in the economy of tomorrow.”
The UK’s development finance institution (DFI), British International Investment, has already been ramping up its commitments, particularly in emerging markets in Southeast Asia, to the transition to clean energy. The impact investor, focused on financing climate infrastructure, invested some $1.56 billion in 2022, bringing its portfolio up to some GBP 6.9 billion. Still, DFIs such as BII are there to catalyse further private capital investment into the sector, especially in emerging economies.
Ultimately, as the drive towards climate mitigation and clean energy is taken in the context of energy security, it becomes clear why countries such as Singapore have made energy efficiency and diversification, as well as innovation in energy technologies and international cooperation, a policy priority.
China leads
China, currently the world’s largest CO2 emitter, is aiming to hit carbon neutrality before 2060. But, it is already able to produce more than enough renewable equipment for not only itself but the rest of the world, French investment bank Natixis says.
China’s current annual generation of solar power of 518 gigawatt (GW) already exceeds the 468 GW global annual demand. But its solar industry, following spectacular growth, is facing several challenges including overcapacity; sluggish overseas demand; and rising protectionism elsewhere.
In part to address this, Natixis proposes China now focus on investing in grid construction and energy storage facilities, to help reduce overcapacity as well as ease the pressure from resistance to China’s cheap green exports. China’s State Grid, the country’s main grid operator, announced recently that it will invest a record over 650 billion yuan ($88.7 billion) in the country’s power grid in 2025.
Funding and fundraising
Amid an overall tighter funding environment, climate tech investments in Southeast Asia fell in 2024 for the first time in nine years. Still, as climate tech cements itself as a key sector in the ecosystem, its share of total funding in Southeast Asia rose to 11%, the highest level to date, as shown by DealStreetAsia’s data.
2025 has started slow; January saw the pre-seed funding of HiFeed, an Indonesian startup that aims to reduce the environmental impact of cattle farming, from Wavemaker Impact; while Indonesian poultry startup Chickin raised a 250 billion rupiah ($15.26 million) loan from PT Bank DBS Indonesia for working capital.
Private credit is emerging as a powerful and efficient way of filling the gaps in financing green projects. Impact-focused funds have planned to raise their credit strategy, including venture capital firm TRIREC, and responsAbility, which is looking to allocate as much as $180 million annually into South and Southeast Asia’s climate tech sector for the next three to four years via its credit-focused business; while new private credit strategies, such as Navis Capital’s, are adding the climate theme.
Another emerging trend could be secondaries transactions among impact-focused private capital investors, which could in turn precipitate a wave of new impact investments amid challenging exit conditions.
Climate capital raising has kept momentum despite headwinds. Swiss impact investment manager BlueOrchard Finance has roped in limited partners such as BII, the Nordic Development Fund; German development bank KfW; and Schroders, the majority owner of BlueOrchard, for its second climate insurance vehicle. responsAbility is expected to close its $500-million Asia climate fund this year, after having secured more than two-thirds of the target.
China’s CICC Capital has launched a green private equity fund, and targets to raise just over 3 billion yuan ($413.6 million) for investments in green energy, transportation, manufacturing, city solutions, and other related industries.
Even first-time climate funds are making headway. Vietnam-based private equity firm Mekong Capital said one of its priorities in 2025 will be the first close of its inaugural climate vehicle, the Mekong Earth Regeneration Fund.
Meanwhile, Shift4Good, a Singapore- and Paris-based VC founded by former investors in Gojek has raised $230 million to provide Series A to B capital for startups driving decarbonisation in the transport industry.
