Asia’s path to climate-resilient infrastructure

In its pursuit of becoming a global economic powerhouse, Asia faces the dual challenges of infrastructure development and climate change. Building climate-resilient infrastructure is urgent as floods, typhoons and other climate-related disasters continue to devastate countries across the region. These events underscore the heavy toll of climate change on lives, livelihoods and economic stability in developing Asia.

Asian countries have taken significant steps to address these challenges. Indonesia’s Disaster Risk and Financing Insurance Strategy reflects a broader regional commitment to sustainable growth. Other Asian nations are also recognising that building an infrastructure capable of withstanding climate challenges is essential for long-term development.

Asia’s climate-resilient infrastructure initiatives are already delivering meaningful social and economic benefits. These projects not only protect vulnerable communities from climate-related disasters but also create jobs, enhance public health and strengthen economic resilience across the region. While high costs, funding gaps and regulatory complexities remain, efforts are ongoing to address these issues. There is also growing recognition of the importance of balancing economic growth with environmental sustainability and social inclusivity, ensuring that all communities are part of the region’s journey toward climate resilience.

Globally, Asia has led the way with innovative financing mechanisms and public-private partnerships. But other regions also bring valuable and unique lessons. Africa, for instance, has made progress with its adaptation agenda through the Africa Climate Resilient Investment Facility, while Latin America focuses on climate-related social inclusion through initiatives like the Economic Commission for Latin America and the Caribbean’s strategies for green infrastructure. Asia’s strategic use of Islamic finance, particularly through green sukuk (also known as sharia compliant bonds), and its growing ASEAN-wide alignment efforts are important differentiators in the global landscape of climate-resilient infrastructure, especially in Indonesia and Malaysia.

Climate-resilient infrastructure requires substantial financial resources and several Asian countries are exploring innovative financing mechanisms. Indonesia’s groundbreaking issuance of green sukuk bonds has raised over US$7 billion since 2018 to fund projects that cut emissions and promote sustainability, including renewable energy, waste management and reforestation. This success highlights Islamic finance’s potential to align with global climate goals, setting a strong precedent for the region. Malaysia and Bangladesh have similarly started issuing green sukuk, contributing to regional efforts to combat climate change.

Asian countries are also exploring other innovative financing tools. Indonesia’s issuance of Sustainable Development Goals Bonds and Samurai Blue Bonds exemplifies the region’s growing focus on leveraging financial markets for sustainable development. The country’s green taxonomy has also generated productive discussions about labelling and regulating climate-related projects. These initiatives reflect Asia’s commitment to aligning financial innovation with global climate goals. As the region refines these frameworks, there are valuable opportunities to learn from global experiences. Africa’s progress in phasing out coal and Latin America’s successful renewable energy transition can guide Asia in promoting climate resilience.

Private sector involvement in financing climate-resilient infrastructure is vital across Asia. In Indonesia, blended finance models managed by PT Sarana Multi Infrastruktur under the Ministry of Finance have attracted private investment to support green projects. This approach is mirrored in countries such as India and the Philippines, where blended finance can help de-risk investments and drive sustainable infrastructure projects.

Measures to boost green infrastructure and large-scale projects aligned with climate goals are being implemented across the region. The Indonesia Infrastructure Guarantee Fund is mitigating investment risks in public-private partnerships and advancing the green economy transition. Vietnam and Thailand have similarly developed infrastructure funds and guarantees to attract green investment, signalling a regional shift towards sustainable development.

Asian governments are also introducing fiscal instruments, including subsidies and tax incentives, to promote the adoption of new and renewable energy technologies. Indonesia’s tax holidays and allowances for renewable energy projects are mirrored by policies in India, where renewable energy projects benefit from tax incentives. This reduces the financial burden on investors, accelerating the transition to a low-carbon economy.

Asia’s rich biodiversity is another critical area. From Indonesia’s rainforests to the mangroves of the Mekong Delta, the region’s natural heritage is under threat from deforestation, illegal logging and climate change. Asian countries are introducing strategies similar to the Indonesian Biodiversity Strategy and Action Plan to protect these ecosystems. Debt-for-nature swaps, like Indonesia’s US$35 million agreement with the United States, are being explored as a way to finance biodiversity conservation.

Internationally, Asia’s leadership in climate finance is evident through active engagement with multilateral development banks. Partnerships with the Asian Development Bank and the World Bank, through initiatives like the Energy Transition Mechanism and the Just Energy Transition Partnership, are crucial for scaling up renewable energy investments. Indonesia’s innovative financing mechanisms are a scalable and replicable model for other Asian nations.

Collaboration with multilateral development banks also extends to developing domestic carbon markets across Asia. Indonesia’s regulatory framework for carbon financing is echoed in regional efforts, including China’s national carbon market and Japan’s voluntary emission trading system. These initiatives create transparent and credible markets, allowing businesses to participate in both domestic and international carbon trading.

Asia is also spearheading efforts to harmonise sustainable finance standards. The ASEAN Taxonomy, which aligns with global frameworks like the European Union’s, ensures that regional financial flows support sustainable development. This alignment is critical for boosting investor confidence and facilitating cross-border green investments.

Asia’s journey to climate-resilient infrastructure is one of innovation, collaboration and leadership. Countries like Indonesia are mobilising finance, preserving natural heritage and leading global initiatives for a sustainable future.

As Co-Chair of the Coalition of Finance Ministers for Climate Action, Indonesia, along with its Asian counterparts, is committed to advancing the global sustainability agenda. With support from forums like the G20, Asia is poised to lead the charge towards a resilient and sustainable future. The time for action is now.

Parjiono is Indonesia G20 Finance Deputy and Assistant to the Indonesian Minister of Finance for Macro Economy and International Finance.

Boby Wahyu Hernawan is Director of the Center for Climate Change and Multilateral Financing Policy at the Indonesian Ministry of Finance. The views expressed are their own.