Going green doesn’t always mean going big: ‘Pay attention to the small- and medium-sized players as well’

But there remains a huge financing gap, especially among emerging markets that have less ability to tap global capital.

Southeast Asia needs about $200 billion a year to finance its green transition, estimates Mian Ying Chen, head of industries at UOB’s Sector Solutions Group, at the Fortune Innovation Forum in Kuala Lumpur on November 17. However, currently only $50 to $60 billion in investments are made each year.

Chen added that green investments cannot be exclusively focused on large companies. “It is very important for us to pay attention to small and medium players as well,” she said. These companies play a major role in global supply chains, and are particularly abundant in emerging regions such as Southeast Asia.

In October, the Association of Southeast Asian Nations (ASEAN) opened a center to facilitate the green transformation of small and medium-sized enterprises.

“ASEAN’s green transition is mostly financed by debt – a lot of debt,” she said, adding that although banks are “increasingly innovative” in how they structure loans, other private investments are also needed to supplement these loans.

Global companies have begun to downplay the importance of their sustainability programs, in part due to macroeconomic uncertainty, growing demand for potentially dirty resources, and political hostility in places like the United States.

However, investing in green transformation benefits companies in the long term, said Mohd Faris Adly Shukri, managing director of Johor Plantation Group Berhad (JPG), a Malaysian palm oil company. Doing so allowed his company to sell its products in more regulated markets (such as Europe), thus improving profitability.

Mohammed Fares said: “We were able to obtain bonuses, rather than just commodity prices, which enabled us to deliver better performance in terms of our financial results.”

JPG has invested in converting biogas (an agricultural byproduct) into biomethane, which can be used as an alternative to natural gas in power generation. The company is also building an integrated sustainable palm oil complex, which will be powered by a central renewable energy plant.

Mohammed Fares said that these sustainability initiatives have enhanced investors’ appetite for JPG shares. He said that in addition to meeting environmental and social requirements, these initiatives also help companies achieve results, remain profitable and maintain their existence.

JPG was listed on Bursa Malaysia, Malaysia’s stock exchange, in July 2024. Shares have risen 80% since then, even as the benchmark FTSE Bursa Malaysia KLCI index remains flat.

Environmental activists have previously targeted the palm oil industry over deforestation concerns, among other issues. Since then, the industry has attempted to adopt measures to improve its environmental performance through measures such as the Roundtable on Sustainable Palm Oil.

“Although people are criticizing the palm oil industry, the response from investors has been very encouraging. In fact, we have gotten a lot of response from foreign markets – including Western markets – that subscribe to our shares,” Mohamed Fares said.

With more informed and socially conscious consumers, green investments are now a necessity rather than a luxury.

“This generation [of consumers] They are becoming more aware of the products they consume, whether they are sustainably sourced or not, [and if] “It’s circular,” said UOB’s Chen.

Mohamed Fares said industry giants like JPG have a role to play to ensure smaller players are not left behind. JPG has a smallholder inclusion programme, where the company helps small farms “practice good agronomy” and obtain certification for sustainable palm oil.

Financial institutions such as banks also play a key role in stimulating the green transition in ASEAN, Chen said. “We ask our customers: What transformation risks are involved? How can we help you?”