Latest Insights on Stranded Assets in Thailand

Across Southeast Asia, the transition to clean energy is gaining momentum, but progress remains uneven. While countries have set ambitious net-zero targets, the region continues to rely heavily on fossil fuels, with coal and natural gas still dominating power generation. Thailand faces similar hurdles in its energy transition. While it has made strides in renewable energy deployment, it remains heavily dependent on fossil gas, which is still classified as a transition fuel in national energy plans.  

In this month’s SIPET Transition Finance Series, we speak with Sarinee Achavanuntakul, Managing Director of Climate Finance Network Thailand (CFNT), an independent research organization dedicated to advancing sustainable finance in Thailand and the region. Sarinee is a former investment banker, turned public intellectual and thought leader in the area of development broadly, and in recent years, she has focused more of her work on climate finance and sustainable investment.  Along with some colleagues, Sarinee set up CFNT last year.  She and her CFNT colleagues are working extensively on financial sector policies, corporate sustainability, and the risks of stranded assets related to Thailand’s energy transition. 

In this conversation with Peter du Pont, Senior Advisor to SIPET and Co-CEO of Asia Clean Energy Partners, Sarinee offers insights into the current state of transition finance, challenges banks face in aligning with climate goals, Thailand’s policy and regulatory barriers, and the role of disclosure standards and stranded asset risks in shaping the region’s financial future. 

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SIPET Connect: Transition finance is often discussed alongside green finance and sustainable finance, but its role in Southeast Asia’s energy transition is distinct. How would you define transition finance, and how does it differ from these other forms of climate-related financing? 

Sarinee: Transition finance is essential for economies shifting from high-carbon to low-carbon energy. No matter how much we promote green finance—which typically funds renewable projects like wind or solar farms—if most financial flows remain locked into fossil fuel infrastructure, the transition will stall. 

There are two key components to transition finance. The first is financing mechanisms that enable the shift away from high-carbon infrastructure, such as funding early coal plant retirements or repurposing fossil fuel assets into cleaner alternatives. A good example is Singapore’s transition credits1, which are designed to support early coal retirements. 

The second aspect is unlocking financial flows from fossil fuel investments and redirecting them toward clean energy. Banks and financial institutions play a major role here. Many have set net-zero targets, but for those goals to be meaningful, banks must provide a clear transition plan—showing how they will gradually phase down fossil fuel lending and scale up investments in clean energy. 

Unlike green finance, which focuses solely on funding projects already considered “green,” transition finance is about actively enabling the shift—by helping existing high-emission industries adapt, rather than simply supporting those that are already sustainable. 

SIPET Connect: What are the biggest challenges for banks in shifting away from fossil fuel lending? 

Sarinee: Banks are intermediaries—they don’t produce energy themselves but play a crucial role in allocating capital. This means that when a bank sets a net-zero target, which also includes the emissions from a company’s supply chain—or Scope 3 emissions—the real challenge is: Will their clients transition? If fossil fuel companies receiving financial support from banks don’t decarbonize, banks won’t meet their climate commitments either. 

Banks essentially have two choices when aligning with net-zero goals: 

Phasing out fossil fuel lending: This approach reduces exposure to high-carbon assets but is difficult because fossil-fuel-based businesses remain profitable and aligned with government policies. Banks that move too early risk being at a competitive disadvantage if their peers continue financing fossil fuel infrastructure and operations. 

Working with clients on decarbonization: Instead of cutting off financing, some banks engage with fossil fuel clients to help them develop transition plans. For example, Kasikorn Bank’s climate consultancy unit2 helps clients design decarbonization pathways while maintaining financial relationships. 

But even this approach has challenges. Bankers are not energy transition experts—they are experts in financial services. Providing technical decarbonization advice requires new skill sets, which take time to build. Additionally, banks need to integrate transition finance products that effectively incentivize clients to move toward cleaner energy sources. 

Ultimately, banks need clear policy signals and incentives to make transition finance scalable. Without strong regulatory direction, many financial institutions will hesitate to take decisive action. 

SIPET Connect: What are the financial risks of continuing fossil fuel investments? 

Sarinee: One of the biggest risks is stranded assets. Based on CFNT’s research, under different climate scenarios, the potential value of stranded fossil-fuel assets owned by Thai power producers could be valued between $10 billion and $15 billion.3 This is a major financial risk for banks that continue lending to fossil-fuel-based projects without a clear transition plan. 

Another looming issue is carbon pricing. While Thailand does not yet have a carbon tax for the energy sector, I believe it is only a matter of time before it is introduced. When that happens, gas-fired power will become even less competitive compared to renewables. If banks fail to anticipate this shift, they could end up with bad loans tied to fossil-fuel-based assets that are no longer profitable. 

Ultimately, financial institutions need to understand and integrate these risks into their lending strategies, rather than assuming fossil fuel investments will remain viable in the long run. 

SIPET Connect: Thailand’s power development plan still includes new fossil gas plants. How does this affect transition finance efforts? 

Sarinee: The slow progress in transition finance is largely due to the absence of a clear policy directive. In the most recent draft of Thailand’s Power Development Plan (PDP), while there are no new coal-fired power plants, there is still no official coal phase-out date or plan, and the PDP continues to include a substantial share of new fossil-based, natural gas plants. 

For commercial banks, this creates a dilemma. Many have financed gas companies for decades, and while they might set ambitious net-zero targets, they are operating in a policy landscape that still strongly supports natural gas. The government’s stance effectively signals that natural gas will remain a transition fuel for the foreseeable future. 

Thailand’s long-term Power Purchase Agreements (PPAs) for gas infrastructure guarantee fixed returns for fossil fuel projects, making them low-risk investments for banks. This financial certainty reduces incentives for banks to shift funding toward renewable energy, as renewable projects often lack similar guaranteed revenue streams under existing policies. With such financial certainty, banks have little incentive to prioritize renewable energy—despite the fact that wind and solar are now more cost-competitive. 

Without stronger policy signals—such as a carbon tax or regulatory frameworks that make non-transition projects more costly—banks will continue to finance fossil fuels, prioritizing financial security over the energy transition." 

SIPET Connect: There has been discussion about introducing a carbon tax and an Emissions Trading System (ETS) in Thailand. How would these impact transition finance? 

Sarinee: Thailand is exploring both options, but neither is fully implemented yet. A carbon tax could provide a clear price signal, but if it is set too low, it won’t drive real change. Similarly, an ETS could allow industries to trade emissions allowances, but its effectiveness will depend on how strictly it is enforced. 

If designed well, these mechanisms could push banks and corporations to invest in clean energy faster. But without strong regulatory backing, they risk becoming symbolic rather than transformative. 

SIPET Connect: How impactful are disclosure standards and green taxonomies in shaping transition finance? Can they meaningfully shift investor and bank behavior, or do they risk becoming just another reporting requirement? 

Sarinee: Disclosure standards alone are not enough. The real challenge isn’t just requiring companies to report their emissions—it’s whether investors, regulators, and financial institutions actually use that information to change financial flows. Right now, we’re still early in that journey. 

Fair Finance Thailand, a coalition co-founded by CFNT’s parent company Sal Forest, recently conducted a case study comparing climate disclosures from six Thai banks, and one of the biggest challenges they reported was assessing the quality of emissions data from their clients. This difficulty in monitoring, reporting, and verifying emissions isn't just a problem for banks—regulators and government agencies also struggle to standardize and compile credible emissions data across sectors. If banks don’t have reliable data, how can they accurately price risk or make strategic decisions around transition finance? 

On the regulatory front, Thailand’s Securities and Exchange Commission (SEC) has announced that it will mandate IFRS S1 & S24 climate disclosures5 for publicly listed companies, beginning with the SET50 firms in the coming years. This follows similar steps taken in Singapore and Malaysia, so Thai companies must now catch up. Meanwhile, the Bank of Thailand’s Green Taxonomy is also being introduced to help categorize financial flows. Both frameworks could help set new standards for how Thai banks approach climate risks and transition finance. 

However, the key question remains: Will these regulations actually change lending behavior, or will they simply add another compliance requirement with limited impact? Without strong policy direction and regulatory enforcement, disclosure runs the risk of becoming a box-ticking exercise rather than a real driver of change. If financial institutions are serious about transition finance, they need to go beyond reporting—they must actively integrate climate risks into credit decisions and capital allocation strategies. 

SIPET Connect: Can you tell us about Climate Finance Network Thailand (CFNT) 6and its role in advancing climate finance policies? 

Sarinee: CFNT is primarily a research organization, but the word “network” in our name reflects our goal of creating a community of practitioners interested in climate finance and sustainable development. Climate action is inherently complex and requires collaboration across multiple disciplines, so we aim to bridge knowledge gaps and foster partnerships that push Thailand’s financial sector toward more proactive climate action. 

Currently, CFNT focuses on climate finance research, with a particular emphasis on how financial institutions can be incentivized to shift away from high-carbon investments toward green and climate adaptation projects. We started with research on stranded asset risks, financing of the coal phase-out, and alternative financing mechanisms like crowdfunding for solar projects. Since banks in Thailand tend to be risk-averse in lending for renewables, we are exploring non-bank financing solutions that could expand access to clean energy. 

Additionally, we are expanding into tracking climate finance flows—analyzing where climate mitigation and adaptation financing originates and how it is deployed in Thailand. Adaptation finance remains a significant challenge because many of the most impactful projects do not yield immediate financial returns. Unlike mitigation projects—where cost savings can be quantified—adaptation projects benefit communities or reduce long-term risks for companies, making them harder to finance. We are working to address these gaps by developing methodologies for evaluating adaptation investments and advocating for policies that support long-term climate resilience funding. 

Through these research efforts and collaborations, CFNT seeks to drive meaningful changes in Thailand’s financial policy, ensuring that climate finance not only supports economic transitions but also delivers tangible benefits to society and the environment. 

SIPET Connect: Are you optimistic or pessimistic about scaling up transition finance in Thailand? 

Sarinee: [chuckles] I have to be optimistic to work in climate finance in Thailand! But there are real reasons to be hopeful. Unlike Indonesia, Thailand does not rely heavily on coal for power generation—we can literally count the coal-fired power plants still operating, and they account for about 20% of power generation. Many of them are old—15 years or more.  And many are state-owned, which means that Thailand could easily announce a date to reach a coal-free power sector and work toward that goal. 

Another promising factor is the rise of decentralized renewable energy. More and more Thais, facing severe droughts and floods, are questioning why their local governments lack control over energy decisions. If properly supported, renewables could strengthen energy democracy—empowering communities while lowering costs. 

However, for true progress, we urgently need stronger policy direction, a clear coal phase-out plan, and financial instruments that actively incentivize transition, rather than just maintain the status quo. 

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Editor’s Note: Sarinee Achavanuntakul presents a clear-eyed assessment of Thailand’s transition finance landscape—one that is filled with challenges but also ripe with opportunities. Thailand, along with the rest of the ASEAN region, face policy inertia, financial lock-in, and slow-moving bank strategies, but there is also growing market pressure for change. 

As the region grapples with rising energy costs, stranded asset risks, and evolving disclosure rules, the key question remains: Will financial institutions proactively lead the transition, or will they wait until market forces leave them with no choice?  

As Thailand strides toward its 2050 carbon neutrality goal, innovative solutions are essential to balance energy demands, food security, and climate resilience. Enter agrivoltaics—a dual-use approach that integrates solar panels with agricultural activities. This blog explores how Thailand can harness agrivoltaics to transform its energy and agricultural sectors, drawing insights from a recent study by the project CASE and School of Renewable Energy and Smart Grid Technology (SGtech), Naresuan University.

What is Agrivoltaics?

Agrivoltaics combines solar energy generation with crop cultivation or livestock farming on the same land. By installing solar panels above or between crops, this system optimises land use, reduces water evaporation, and creates microclimates that benefit shade-tolerant plants. For Thailand—a nation with abundant sunlight and a strong agricultural base—agrivoltaics offers a pathway to sustainable development.

Why Agrivoltaics Matters for Thailand?

Economic Empowerment for Farmers

- Farmers gain additional income through solar energy sales or reduced electricity costs.

- Leasing land for solar installations provides financial stability, especially in regions with low agricultural yields.

Climate Resilience

- Solar panels mitigate heat stress on crops, conserve soil moisture, and reduce reliance on fossil fuels.

- Supports Thailand’s pledge to achieve 50% renewable energy by 2030 and net-zero emissions by 2065.

Land Efficiency

- Addresses land scarcity by enabling simultaneous food and energy production. Countries like Germany and Japan allocate 60-70% of agrivoltaic land to agriculture.

Rural Development

- Enhances infrastructure, promotes eco-tourism, and fosters innovation through farmer-academia-industry collaboration.

Thailand’s Policy Landscape: Opportunities and Gaps

While Thailand has policies supporting renewable energy (e.g., the Alternative Energy Development Plan) and sustainable agriculture, agrivoltaics lacks a dedicated regulatory framework. Key challenges include:

- Land Use Conflicts: Agricultural land zoning prohibits non-farming activities without permits.

- Grid Connectivity: Farmers face bureaucratic hurdles to sell surplus solar energy.

- Technical Knowledge: Limited awareness among farmers about agrivoltaics design and crop compatibility.

Global Success Stories: Lessons for Thailand

1. China: Scaling Agrivoltaics on Degraded Land

The 200 MW Jiangshan Agrivoltaic Park in Zhejiang Province combines solar panels with shade-tolerant herbs (e.g., Dendrobium orchids) and livestock zones. The project restored degraded, erosion-prone land while generating clean energy for 113,000 households.

Key Policies:

- Subsidies for solar projects on marginal or underutilised land.

- Integration of agrivoltaics into the 13th Five-Year Plan to maximise land efficiency.

Outcome: 90% vegetation cover reduced soil erosion, and farmers earned dual income from crops and energy sales.

Adaptation Tip: Thailand could replicate this model in its northeastern drought-prone regions, pairing solar with drought-resistant crops like moringa or medicinal herbs.

2. France: Balancing Energy and Agriculture with Strict Standards

French startups like Sun’Agri use dynamic solar panels that tilt to optimise light for crops. A vineyard in southern France reported a 12% increase in grape quality under panels due to reduced heat stress.

Key Policies:

- Decree No. 2024-318: Caps solar coverage at 40% of agricultural land and mandates <10% crop yield loss.

- Feed-in tariffs for small-scale projects (<500 kW).

Outcome: Over 300 agrivoltaic farms operate nationwide, with 1.2 GW installed capacity.

Adaptation Tip: Thailand could adopt dynamic panel technology for high-value crops like durian or mangosteen.

3. Italy: Agri-PV Meets High-Value Crops

The 70 MW Pontinia Solar Farm in Lazio integrates bifacial solar panels with olive groves and saffron cultivation. The project allocates 65% of land to agriculture while powering 47,000 homes.

Key Policies:

- National Recovery and Resilience Plan (PNRR): €1.1 billion allocated for agrivoltaics, covering 40% of project costs.

- Requires 70% of land to remain agricultural.

Outcome: Improved soil health and a 30% rise in saffron yields due to partial shading.

Adaptation Tip: Thailand’s orchards (e.g., lychee, longan) could benefit from similar partial-shade systems.

4. South Korea: Overcoming Land-Use Barriers

Pilot projects like the Rockport Blueberry Farm in Maine (USA collaboration) use elevated solar panels to grow blueberries, reducing water use by 20%.

Key Policies:

- Dual-Use Solar Energy Act: Allows temporary solar installations on agricultural land for up to 23 years.

- Exemptions for projects on saline or low-yield farmland.

Outcome: Farmers earn 3x more from energy sales than traditional farming.

Adaptation Tip: Thailand’s coastal salt farms could adopt similar models for solar-salt production synergy.

5. India: Community-Driven Agrivoltaics

The PM-KUSUM Scheme supports 10 GW of solar capacity on farmland, with panels elevated to allow crop growth underneath. In Gujarat, farmers grow turmeric and spinach under solar arrays.

Key Policies:

- Subsidies for solar pumps and grid-connected systems.

- Land conversion waivers for projects in arid regions.

Outcome: 40% reduction in irrigation costs and 25% higher crop yields.

Adaptation Tip: Thailand’s rice paddies could integrate solar panels during non-growing seasons to maximise land use.

Why These Models Matter for Thailand

Each success story underscores a critical lesson:

Flexibility: Agrivoltaics must adapt to local crops, climate, and land types.

Policy Clarity: Clear regulations on land use, energy sales, and farmer incentives are non-negotiable.

Community Buy-In: Farmers and rural communities must be central to project design and benefits.

By blending these global insights with Thailand’s agricultural strengths, the country can pioneer a tropical agrivoltaics model that boosts food security, cuts emissions, and empowers rural economies.

Policy Recommendations for Thailand

Cross-Sector Collaboration: Establish a multi-ministry taskforce (Energy, Agriculture, Environment) to streamline regulations.

Financial Incentives: Subsidise solar installations for farmers; introduce feed-in tariffs for agrivoltaics energy.

Land Zoning Reforms: Create a new land-use category for agrivoltaics, permitting dual-purpose activities.

Capacity Building: Train farmers in agrivoltaics best practices through university partnerships.

Pilot Projects: Launch demonstration farms in drought-prone regions (e.g., Northeast Thailand) to test crop-solar synergies.

The Road Ahead

Unlocking Thailand’s agrivoltaics potential requires proactive policies, strong stakeholder collaboration, and increased public awareness. By drawing insights from global leaders and adapting them to local contexts, Thailand has the opportunity to lead the region in sustainable energy and agriculture.

Policymakers: Integrate agrivoltaics into national energy and agricultural strategies.

Investors: Support pilot projects and invest in R&D for agrivoltaics systems suited to tropical climates.

Academics: Conduct research on crop-specific solar panel configurations and assess their impacts on local climate conditions.

*This blog was originally published on the website for the project Clean, Affordable, and Secure Energy for Southeast Asia (CASE)

Thailand’s ambitious commitment to achieve carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065 underscores the nation’s urgent need to expand its renewable energy (RE) capacity. Rooftop solar PV systems represent a promising solution to diversify Thailand’s energy mix and empower consumers to participate in the energy transition. Despite its vast solar potential and declining technology costs, the adoption of rooftop solar remains significantly underutilized due to various barriers. At CASE, we’ve carefully analysed the challenges holding back rooftop solar in Thailand and crafted a strategic roadmap to help unlock its full potential.

The Untapped Potential of Rooftop Solar

Thailand boasts a technical solar potential exceeding 300 GW, yet less than 2% of its land area is needed to achieve this. By 2037, the market potential for rooftop solar PV energy is projected at 9,000 MW. However, as of 2022, only 1,800 MW of rooftop solar PV capacity has been installed, representing a small fraction of this potential. With electricity costs reaching grid parity and technology advancements making solar PV more efficient and affordable, the opportunity to harness rooftop solar as a key renewable energy source has never been greater.

Key Barriers to Investment

Our research has uncovered eight key risks that are slowing down investments in rooftop solar PV systems.

1. Administrative and Permitting Risks: A complex and time-consuming permitting process involving multiple agencies results in high costs and inefficiencies. For installations exceeding 1 MW, additional factory operation permits are required, further complicating the process.

2. Power Market Risks: Inconsistent policy frameworks, low buyback rates under net-billing schemes, and a lack of long-term incentives hinder investor confidence and consumer adoption. Policies allowing only self-consumption and prohibiting grid exports also limit financial viability for larger systems.

3. Financial Risks: Restricted access to financing, unattractive loan terms, and lender aversion to project-specific risks discourage investments. Fluctuations in exchange rates exacerbate these financial challenges, as most solar equipment is imported.

4. Developer Risks: A lack of experienced and certified developers increases uncertainties. Small developers often face challenges related to financial management and capacity, while third-party ownership contracts introduce additional risks, such as discrepancies between projected and actual energy consumption.

5. Hardware Risks: High costs of lithium-ion batteries and limited capacity for testing solar panels pose challenges for ensuring the quality and affordability of installations.

6. Grid and Transmission Risks: Limited grid hosting capacity and a lack of transparency regarding grid codes and connection requirements lead to additional costs for consumers.

7. Labour Risks: Insufficient certified solar PV installers and a lack of specialized engineering expertise hinder the deployment of high-quality systems.

8. Social Perception Risks: Misconceptions about rooftop solar systems, such as fears of lightning strikes or unrealistic expectations about energy independence, deter adoption, particularly in the residential sector.

Quantifying the Impacts of Risks

To help you better understand the financial impact of these risks, we’ve used the UNDP’s Derisking Renewable Energy Investment (DREI) framework to break it down. The analysis reveals that administrative and permitting risks, power market risks, and developer risks account for 57% of the risk premiums that elevate the cost of equity and debt. Mitigating these risks could lower the cost of equity by 2.4 percentage points and the cost of debt by 1.7 percentage points, making rooftop solar investments more attractive.

Recommendations to Overcome Barriers

To address these challenges, we outline several actionable recommendations:

1. Streamlining Administrative Processes:

- Develop a centralized one-stop-shop platform to simplify permitting, streamline equipment registration, and provide online application processes.

- Use this platform to consolidate information on equipment standards, financial products, policy incentives, and regulations, reducing time and costs for stakeholders.

2. Enhancing Policy and Financial Support:

- Establish long-term targets and steady support programs for rooftop solar PV, covering residential, commercial, and industrial consumers.

- Introduce risk-sharing mechanisms like loan guarantees, performance-based incentives, and partial risk guarantees to improve access to finance.

- Encourage the development of insurance solutions to cover risks associated with energy production interruptions.

3. Aligning with Grid Planning:

- Integrate rooftop solar targets with grid development plans to enhance demand forecasting and grid hosting capacity.

- Promote the use of energy storage systems (ESS) to enable demand response and reduce peak demand.

Building Capacity and Raising Awareness:

- Expand training and certification programs for solar PV installers to improve the quality and safety of installations.

- Conduct public awareness campaigns to address misconceptions and highlight the economic and environmental benefits of rooftop solar.

Fostering Innovative Business Models:

- Support peer-to-peer (P2P) energy trading and direct power purchase agreements (PPAs) to encourage community-driven energy sharing and long-term price stability.

- Explore vehicle-to-grid (V2G) technology to use electric vehicles as energy storage devices, creating new revenue streams and enhancing grid resilience.

Improving Developer Transparency:

- Establish review systems for developers and installers to enhance transparency and build investor confidence.

- Implement policies to manage solar waste and promote second-life markets for used panels and batteries.

We believe the success of these initiatives depends on all of us—government agencies, utilities, financial institutions, private sector stakeholders, and individuals—working together. By fostering partnerships and aligning goals, Thailand can create a conducive environment for rooftop solar PV investments, ensuring a just and sustainable energy transition.

Rooftop solar PV systems offer a transformative opportunity for Thailand to achieve its renewable energy targets, reduce dependence on fossil fuels, and empower consumers to participate in the energy transition. By addressing key barriers and implementing the recommendations outlined in the CASE report, Thailand can unlock the full potential of rooftop solar, paving the way for a cleaner, greener future.

*This blog was originally published on the website for the project Clean, Affordable, and Secure Energy for Southeast Asia (CASE).

As Southeast Asia enters 2025, the urgency to align the energy systems in rapidly-growing countries with their net-zero ambitions is more pressing than ever. Ten years after the signing of the Paris Cimate Agreement, the financial sector (banks, investors, and development financing institutions) across Southeast Asia is clearly focusing on understanding how to support investments that contributed to decarbonization in energy generation as well as across end users in the commercial and industrial sectors. Transition finance has emerged as a critical enabler for decarbonization, bridging the gap between the reality of today’s fossil-based economies and the clean energy future that governments, businesses, and communities aspire to achieve, and that governments and corporations have committed to realize, through their net-zero commitments. 

To start the new year, SIPET Connect is proud to continue its Transition Finance Series with Melissa Brown, Director at Daobridge Capital. With more than three decades of experience as a power sector analyst across Asia, Melissa is a leading voice in shaping financial strategies that drive energy transitions. Her career spans roles as Director of Asia Finance Studies at IEEFA1 and Managing Director at Citigroup, where she led teams analyzing major power companies and advising on sustainable energy solutions. Known for her pragmatic and actionable insights, Melissa is a trusted advisor to investors, regulators, and corporates navigating the complexities of Southeast Asia’s energy transition. 

In this timely discussion with Peter du Pont, Senior Advisor to SIPET and Co-CEO of Asia Clean Energy Partners, Melissa explores the evolution of transition finance, the role of global frameworks, and the importance of innovative tools like sustainability-linked loans and blended finance mechanisms. Reflecting on the progress made over the past three decades, and the challenges ahead, Melissa provides a candid assessment of Southeast Asia’s readiness for transition finance in 2025, shares examples of inspiring deals, and outlines a roadmap for financial institutions to play a leading role in shaping a resilient, low-carbon future. 

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SIPET Connect: Transition finance has gained significant traction as a key mechanism for decarbonization, including in Southeast Asia. Could you elaborate on the origins of the concept and how it evolved from earlier discussions around green finance? 

Melissa: The concept of transition finance didn't just emerge out of thin air—it was a natural evolution from the broader conversations around green finance. The idea came into sharper focus when market players began to see the limitations of green finance, particularly in regions like Southeast Asia, where economies are deeply tied to high-carbon industries. Transition finance was positioned as a pragmatic tool, acknowledging the realities of sectors that can’t decarbonize overnight. 

But let’s first take a step back. Initially, there was this idea of a ‘greenium’—the notion that issuers of loans or bonds who committed to sustainability, with high transparency and excellent standards, could attract capital at better pricing. This was an optimistic view of how markets might develop. The idea was that investors would pay a premium for green debt because it aligned with their sustainability mandates. However, that turned out to be naive in many cases. 

We've seen moments where a greenium exists, but it’s often fleeting. It depends on market conditions, and it's not something you can always count on. Companies with strong sustainability credentials might attract a broader range of capital providers, but the notion of a consistent greenium wasn’t the silver bullet some imagined. It’s important to understand that the transition finance concept was born out of necessity—to fill the gap left by green finance for economies that need incremental steps, not leaps. 

SIPET Connect: How do you see the market now in terms of its readiness for transition finance? 

Melissa: The market is evolving, but it’s still in a learning phase when it comes to transition finance. There’s growing recognition of the need to address transition pathways, but many players are still focused on green finance, which, while important, doesn’t cover the broader set of needs for economies like those in Southeast Asia. 

We see a lot of experimentation right now, with banks and institutions exploring sustainability-linked loans and blended finance mechanisms. But the scale of investment isn’t where it needs to be yet. A big challenge remains in building confidence—both for private capital to invest and for corporates to take on the commitments that these instruments require. 

Another factor shaping the market is the increasing involvement of DFIs2. Their ability to de-risk investments is critical, particularly in hard-to-abate sectors. But what’s equally important is an alignment between DFIs and private capital, to ensure that funding is accessible and targeted at the right kinds of projects. 

SIPET Connect: Sustainability-linked loans are increasingly popular. How important are these instruments for advancing transition finance? 

Melissa: Sustainability-linked loans (SLLs) are incredibly important in Southeast Asia because they provide a way for companies to integrate sustainability into their financial strategies without being tied to a specific project, as with green bonds. The flexibility of these instruments allows companies to work on broader operational goals. 

In Thailand, for example, we’ve seen SLLs linked to metrics like reducing energy intensity or greenhouse gas emissions in operations. These metrics are increasingly tied to international standards, which is encouraging. But, as with all tools, the devil is in the details. If the targets are too modest or the penalties for non-performance aren’t meaningful, the impact can be minimal. 

To make SLLs effective, there’s a need for strong performance benchmarks and transparency. Banks and lenders have a role to play here in ensuring that the targets are ambitious enough to drive change. It’s not just about having sustainability metrics—it’s about ensuring those metrics align with a decarbonization pathway that makes a real difference. 

However, we should also acknowledge that these are new policies and new instruments with new constructs that have untested reporting patterns. Even the issuers themselves are still figuring out how to consistently meet their commitments and measure performance in a credible way. There is a learning curve for the entire financial ecosystem—borrowers, lenders, and regulators alike. To build confidence in these instruments, the financial sector must focus on creating robust reporting frameworks and ensuring accountability. 

SIPET Connect: What is the policy narrative that we see now? How would you describe it, and how is it going to change? 

Melissa: I think we’re coming to the end of nearly a decade of active innovation and experimentation around sustainable finance. But I also think 2025 is going to be a year where you’ll see significant challenges to what has been a policy narrative largely prescribed at a global level. This narrative hasn’t yet been fully realized in Southeast Asia and is likely to be turned on its head. 

There are consequential developments on the horizon. Some will happen in the first half of 2025, while others have already occurred, signaling a need to reevaluate. For instance, the policy-driven narrative we’ve seen globally—particularly from the EU—has focused on market-based frameworks that assume uniformity across regions. Yet Southeast Asia’s socio-economic and political realities require more nuanced, market-specific solutions. 

I’m bullish on transition finance, but I believe that some of the tools we’ve relied on may diminish in importance. Policymakers and financial institutions must adapt to these shifting dynamics. Banking regulators and government leaders need to step up and break away from the one-size-fits-all playbook, allowing for more innovation and market-tailored approaches. 

SIPET Connect: In the context of transition finance, there has been a growing conversation about the role of global frameworks in shaping regional approaches. The European Union, in particular, has set ambitious benchmarks with its policy frameworks like the EU Taxonomy and other sustainable finance initiatives. How do you see these influencing transition finance efforts in Southeast Asia?  

Melissa: The European Union has been a significant driver of sustainable finance globally, with initiatives like the EU Taxonomy and various policy-driven market frameworks. These have set the benchmark for what many regions consider the gold standard in sustainable finance. However, one of the challenges we face in Southeast Asia is the mismatch between these global standards and the local market realities. 

Southeast Asia operates in a very different socio-economic and political environment. Policies that work in Europe, with its developed markets and robust infrastructure, don’t always translate effectively here. For example, frameworks that assume uniformity across industries and markets don’t account for the diverse energy mix and economic constraints in countries like Indonesia or Vietnam. 

That said, the EU framework still plays an important role by providing a reference point. It helps financial institutions and policymakers in Southeast Asia align their efforts with global expectations, especially for international investors. However, what’s critical is adapting these frameworks to local contexts—allowing for more tailored approaches that reflect the region’s unique transition challenges. 

SIPET Connect: When we look at the first big round of green finance in Asia and Southeast Asia, it was often tied to Nationally Determined Contributions (NDCs) and government commitments. How do you see the effectiveness of this approach, and what lessons can transition finance learn from it? 

Melissa: The early wave of green finance in Southeast Asia largely focused on projects with straightforward green credentials—solar farms, wind farms, or other renewable energy investments. These were often linked to NDCs, which were meant to reflect national priorities under the Paris Agreement. However, the reality is that many of these NDCs have been more aspirational than actionable. 

As an investor or lender, you can’t assume that an NDC automatically translates into a strong policy framework or enforceable commitments. Many Southeast Asian countries face significant gaps between their stated ambitions and the mechanisms needed to achieve them. This disconnect creates uncertainty for financial institutions trying to align their portfolios with long-term climate goals. 

The lesson for transition finance is that it must be more pragmatic and flexible. Unlike green finance, which can focus on 'pure green' projects, transition finance needs to navigate complex realities—helping sectors that are not yet fully aligned with net-zero goals but are making meaningful progress. It’s about bridging the gap between where companies or sectors are today and where they eventually need to be in a net-zero future, without relying on overly optimistic assumptions about policy or market readiness. 

SIPET Connect: Given that there is no one-size-fits-all, are there any specific deals or initiatives that give you hope or could serve as models for future efforts? 

Melissa: Absolutely, there are several deals that stand out as benchmarks for what transition finance can achieve when applied thoughtfully. One of the examples I find particularly compelling comes from Thailand, where we’ve seen sustainability-linked loans tied to very clear and measurable corporate commitments. These loans aren’t just about providing capital; they’re structured to create accountability for companies to meet specific decarbonization targets. That kind of alignment between financial terms and sustainability outcomes is exactly what we need to replicate across other markets. 

I think that blended finance is often over-hyped by policy advocates. That said, really targeted  blended finance models public and private capital has the potential to fund transitions in heavy industries. For instance, financing structures that integrate concessional funding with commercial investment have played a pivotal role in de-risking projects and making them bankable for private players. These deals demonstrate the power of collaboration between development finance institutions, governments, and private sector actors. 

The scalability of these initiatives is what’s truly exciting. If we can refine the frameworks and improve reporting mechanisms, these kinds of deals can serve as templates. They show that transition finance is not just about meeting ESG standards but about creating real, measurable impacts in emissions reductions and sustainability transitions. It’s a space where innovation can meet scale in very meaningful ways. One word of warning though: the country context really matters because providers of concessional financing need certainty that execution risk can be managed and priced correctly. No one will benefit if these deals are seen as bail outs.  

SIPET Connect: As we wrap-up this insightful discussion, what are your final reflections on the evolving role of transition finance? 

Melissa: We’re entering a really complex period, and I think parts of the broader community—especially those who have been strong advocates for sustainable and green finance—may not fully embrace this shift toward transition finance. It’s not going to be universally loved, and there will undoubtedly be points of disappointment along the way. 

But on balance, I’m optimistic. If transition finance is successful in attracting more capital, it will help the market mature in how it prices transition risks. This maturity will make it easier to identify players who can seize technological opportunities and genuinely transform markets. That’s what makes me positive about transition finance—it’s realistic, and it aligns well with how markets can and should function. 

This is also a great time to go back to fundamentals and recognize that the way financial markets create new liquidity for the energy transition is going to vary from market to market. Instead of being intimidated or clinging to a single model that might not fit everywhere, this is an excellent opportunity to dig deeper into what works in specific contexts. Transition finance has the potential to be a catalyst for meaningful change if approached with the right balance of innovation, pragmatism, and market insight. 

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Editor’s Note: Melissa Brown’s perspective offers a compelling look into the transformative potential of transition finance, as Southeast Asia navigates a pivotal year in its climate journey. The region is tackling the intertwined challenges of economic growth and decarbonization, and it is becoming clear that innovation, collaboration, and adaptability are essential. Tools like sustainability-linked loans and blended finance are not just financial instruments—they represent pathways to align capital investments with impactful climate solutions. 

This raises an important question: Are we ready to reimagine how finance operates in the face of an urgent climate reality? Southeast Asia’s leadership in this space will hinge on its ability to embrace complexity, challenge traditional norms, and act with purpose. While transition finance may not be a perfect solution, it provides a vital opportunity to reshape markets, redefine priorities, and drive a more sustainable future. Will business and financial leaders in the region seize this opportunity to make a meaningful impact? 

As we step into 2025, it’s crucial to reflect on the milestones and lessons from 2024. This retrospective not only celebrates some of our program achievements, but it also guides our future efforts in driving the energy transition across Southeast Asia.

2024 was an important year for the project Clean, Affordable, and Secure Energy for Southeast Asia (CASE for SEA) . Focused on Indonesia, Vietnam, Thailand, and the Philippines, CASE for SEA aims to drive change in the power sector towards greater climate change mitigation. These four countries represent nearly three-quarters of total power generation in Southeast Asia, and they play a major role in the region’s ability to meet both development and sustainability goals, as well as the global targets set by the Paris Agreement.

Advancing Regional Collaboration and Research

A key achievement last year was the publication of comprehensive studies that provide evidence-based solutions to the challenges faced by decision makers. Notable among these were ‘Navigating the Transition to Net-zero Emissions in Southeast Asia’ and ‘Electricity Market Designs in Southeast Asia’. These studies offer detailed insights into achieving energy security and integrating renewable energy sources, setting a clear path for the region’s transition to a low-carbon economy.

We also co-organized an important regional workshop on Electricity Market Designs for Renewables, with the Energy Transition Partnership (ETP). This event facilitated dialogue among stakeholders, promoting innovative market designs that support the integration of renewable energy sources. Such collaborative efforts are essential for building societal support and using expert analysis and dialogue to narrow areas of disagreement and build consensus.

Local Initiatives to Drive Impact

In Indonesia, the Indonesia Sustainable Energy Week 2024 (ISEW) brought together policymakers, business leaders, and communities to discuss strategies to achieve national energy goals. The event highlighted the importance of inclusive decision-making and the socio-economic impacts of the energy transition.

Another key progress in Indonesia was the YouTube series ‘Jejak Kiara’. This unique series focussed on the story of a young Indonesian girl and underscored the collective efforts needed to accelerate clean energy transition and the need for public awareness and action. The latest video in this series was released in December.

In the Philippines, we organized the Validation Workshop on Long-Term Energy Scenarios, convening more than 90 participants from various sectors. This collaborative effort is part of an ongoing study aimed at guiding long-term energy planning. The Renewable Portfolio Standards (RPS) Conference 2024 further worked on strengthening renewable energy compliance and fostering partnerships, driving the development of renewable energy projects.

In Vietnam, CASE for SEA co-hosted the Vietnam Energy Transition Forum 2024 with the State Agency for Technology and Innovation (Ministry of Science and Technology). The forum aimed to facilitate the transfer of new technologies and innovations for renewable energy projects. Collaboration with Vietnamese journalists on a press trip focused on renewable energy and energy transition enhanced public awareness and journalistic skills, promoting accurate and effective reporting on energy issues.

SIPET’s Role during 2024

CASE continued to strengthen the Southeast Asia Information Platform for Energy Transition (SIPET) through development of fresh content and building of partnerships. SIPET serves as a platform for discussion and coordination among stakeholders driving the energy transition across Southeast Asia.

SIPET invited articles by thought leaders in the energy transition, and initiated a series of profiles on leaders in the area of transition finance. The Transition Finance series has so far featured interviews with Putra Adhiguna, co-founder, Energy Shift Institute, and with Jason Lee, Head of Sustainability, CIMB Thai Bank. The platform also featured an interview with Roble Velasco-Rosenheim, Director of Partnerships and APAC Markets at the International Tracking Standard Foundation (I-TRACK Foundation), on understanding the role of renewable energy certificates (RECs) and carbon credits in decarbonization.

SIPET was showcased at ISEW 2024 as a valuable resource for renewable energy data and initiatives. Participants praised the platform’s tools, such as the Power Transition Progress Tool and Power Sector Snapshot, for their usefulness in research and analyzing and understanding progress on the energy transition in Southeast Asia.

Advancing the ASEAN Power Grid through APG-AP

One of the most significant regional achievements in 2024 was the progress made through the ASEAN Power Grid Advancement Programme (APG-AP). CASE played a pivotal role in supporting the launch of the Roadmap for Multilateral Power Trade in ASEAN, a landmark initiative aimed at accelerating regional electricity integration. This roadmap lays the foundation for the upcoming in-depth studies on cross-border power trade, enhancing energy security and promoting the use of renewable energy across member states. Looking ahead, Malaysia's upcoming chairmanship of ASEAN in 2025, alongside the anticipated completion of the ASEAN Integrated Masterplan Studies (AIMS) III Phase 3 and the new Framework Agreement for Multilateral Power Trade, will be critical milestones. These developments are expected to further solidify regional energy cooperation and drive the collective transition towards a more sustainable and interconnected energy future.

Looking Ahead to 2025

During 2025, the project CASE for SEA will build on and expand its successes in 2024. We will expand our research on emerging technologies and innovative energy solutions, deepen partnerships with stakeholders, and empower journalists and youth to take an active role in the energy transition. These initiatives will further strengthen the region’s commitment to a sustainable and resilient energy future.

The achievements of 2024 were made possible through the cooperation of partners, stakeholders, and communities. Funded by the International Climate Initiative of the German Government (IKI) the project is led by GIZ GmbH and jointly implemented by Agora Energiewende and NewClimate Institute, the Institute for Essential Services Reform (IESR), the Institute for Climate and Sustainable Cities (ICSC), the Energy Research Institute (ERI) and Thailand Development Research Institute (TDRI). As CASE for SEA looks ahead to 2025, the project remains dedicated to fostering collaboration and driving impactful change across Southeast Asia.

Maximilian Heil is based in Bangkok and serves as Project Coordinator of Clean, Affordable and Secure Energy (CASE) for Southeast Asia, a project implemented by GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH)