Reframing the Energy Transition: What Southeast Asia Is Learning from Transition Finance

As Southeast Asian countries accelerate efforts to meet their corporate and national climate targets, Indonesia faces one of the region's most complex challenges: how to finance its transition from fossil fuels—particularly coal—while creating a cleaner, more inclusive energy economy. Transition finance focuses on moving investment from brown (carbon-intensive) infrastructure into green infrastructure, but they should also aim to achieve a transition-phased, equitable shift of the energy sector that creates jobs and development benefits.  

For this edition of SIPET Connect, Peter du Pont, Senior Advisor on the GIZ CASE project, speaks with a leader who is actively shaping the transition finance landscape in Indonesia. Lishia Erza, Chief Executive Officer of Candra Naya Lestari1, brings a dual perspective as both a sustainable finance expert and an entrepreneur. She draws on her experience with impact investing, local incubation networks, and public-private platforms to empower communities and small businesses. Deni Gumilang, Sustainable Energy Finance Lead at GIZ, has spent more than a decade advancing climate and energy finance in Indonesia, advising ministries, co-developing policy tools, and supporting the design and development of relevant mechanisms like the derisking facilities for RE that align public and private finance. 

Together, Lishia and Deni offer grounded insights into what transition finance looks like in the Indonesian context—how it’s being applied, what gaps remain, and what it will take to ensure that the country’s energy shift is both just and achievable. 

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SIPET Connect: How do you define transition finance in the Southeast Asian and Indonesian context? 

Lishia Erza: 
For me, transition finance is really about financing the in-between—those activities and stakeholders that might not be part of a company’s direct climate plan but are still deeply impacted by the shift to low-carbon systems. There’s a lot of conversation around emissions, but we often forget the social and economic implications. 

Think about the ecosystem surrounding a coal power plant—transport providers, local small and medium enterprises (SMEs), informal workers. If a power plant shuts down, these people are impacted, yet they often don’t factor into corporate decarbonization strategies. Transition finance should be about making sure those groups aren’t left behind. Another is perhaps the transition of industries to lower emission practices. This often requires significant change management that bears financial impact that are too large to underestimate. 

So, while I don’t directly apply transition finance tools in my current supply chain finance work, I do collaborate with banks and asset managers to design new products and asset classes — for example reskilling loans for women or mechanics who need to shift from traditional to electric vehicle industries, to green agriculture practices and so on. The idea is to help them meaningfully participate in the transition, not just survive it. 

Deni Gumilang: 
Upon entering this domain around 2017, the landscape of transition finance was not as developed in Indonesia than it is at present. At that time, Indonesia remained committed to the development of 35 GW of new power capacity—much of it coal-fired. Subsequently, pressure arising from international commitments under the Paris Climate Agreement, and necessitated a strategic pivot towards renewable energy. That shift, both technically and financially, is complicated. 

GIZ has focused its efforts on assisting the government in aligning its public finance mechanisms with more private finance. Initially, the work primarily focused on the public side—supporting the Ministry of Energy, Ministry of Finance, OJK, and other agencies. But now we are trying to integrate applicable structures that can attract private investment as well. This encompasses the design of financial instruments and helping policymakers comprehend how public and private finance can collaboratively support a pragmatic, yet aspiring, transition. 

SIPET Connect: How are financial institutions in Indonesia responding to these needs, especially around support for what is called a “just transition”? 

Lishia Erza: 
We’re seeing more openness from banks and financial institutions, though it’s still early. The financial products under discussion lately aren’t tied to any specific company. For instance, when a bank considers loans for reskilling, it’s not necessarily connected to one employer laying people off—it’s more about understanding that certain sectors are transitioning and workers across those sectors need support. 

We’re seeing more openness from banks and financial institutions, though it’s still early. The financial products under discussion lately aren’t tied to any specific company. For instance, when a bank considers loans for reskilling, it’s not necessarily connected to one employer laying people off—it’s more about understanding that certain sectors are transitioning and workers across those sectors need support. 

In East Java, for example, a municipality aiming for net-zero by 2045 is working with a local bank to offer financial instruments that help their communities. These might include insurance for livelihood protection, new business loans, or support for upskilling. It’s different from the typical sustainability-linked finance, where the metrics are tied directly to a single company’s environmental, social and governance (ESG) goals. However, while the financial institutions are responding through product offerings, I have yet to see FSPs enabling the people element both on FSP and client side for increase in the uptake.  

Deni Gumilang: 

Our focus at GIZ has been to support the policy and regulatory conditions in Indonesia that enable banks and investors to engage. We participated in the design of the Indonesia Financial Services Authority’s (OJK’s) sustainable finance regulation, a pivotal framework that established the foundation for integrating sustainability objectives into financial products. 

We have also contributed to the development of public finance schemes through the Ministry of Finance—examining mechanisms by which public finance can de-risk private investment. In one example, we analyzed a portfolio of 70 power purchase agreements (PPAs), as part of the government's task to ensure fair energy, working with ADM Capital and separately with PT Sarana Multi Infrastruktur (Persero) as well as USAID, to evaluate their bankability. Such pre-investment support is critically important, given that financial institutions often demonstrate a reluctance to proceed independently without policy backing. 

SIPET Connect: What roles does your organization play in enabling these efforts? 

Lishia Erza: 
Candra Naya Lestari is part of an industrial group with subsidiaries working across precision agriculture, manufacturing, and finance. We play a dual role as intermediary and also as ecosystem players. 

First, through one of our collective movements,  we help municipalities. We’re supporting about 100 local governments in building sustainability strategies in their economies. These aren’t just documents—they’re action plans for net-zero transitions, which often include economic development, workforce shifts, and community engagement. 

Second, through our venture building arm we support a curated network of more than 100 businesses—some are inherently sustainable, others are just starting their transition journeys. We’ve helped mobilize approximately $200 million in capital, some of which goes toward empowering local incubators and accelerators. We also work with investors and financial institutions to identify risks, explore deal mechanics, and target specific sectors that need support. 

Deni Gumilang: 
At GIZ, our strength is in its capacity to construct enabling environments. We provide technical assistance to government institutions—like the Ministry of Energy and Mineral Resources, Ministry of Finance, Ministry of Planning/Bappenas, OJK, etc. We help shape regulations, create analytical modeling tools, and run feasibility studies. These things may not be often visible, but they are essential. 

More recently, through projects like the Sustainable Energy Transition Indonesia (SETI), we are  focusing on the transaction level—helping to move projects from the policy formulation to the financing stage, alongside facilitating matchmaking between donors, government, and developers. Through the PERFORM project, We are actively participating in the Energy Transition Mechanism with MoF and ADB. 

SIPET Connect: What are some of the major gaps or barriers you see in advancing transition finance? 

Lishia Erza: 

There’s a huge awareness and competency gap—especially among businesses. Many of them don’t know where to start. Do they work on EV fleets? Green their facilities? Focus on workforce issues? It’s overwhelming, especially for SMEs. Smaller businesses are still trying to navigate doing business and scaling businesses, whilst catching up with digitalisation now they’re under pressure to keep up with climate issues in business. Smaller companies have very limited resources - money, time, bandwidth, skills.  

At APINDO, the national employers’ association, I chair a committee on inclusive economy and capacity building. We’re now working on a centralized platform—a “center for sustainability and transition”—to give businesses one place to access information, financing, technology options, and policy guidance. Right now, committees from logistics, manufacturing, and transport all come to us with questions. We act as a bridge to GIZ, the International Labour Organization, development partners and technology providers, depending on the issue. 

Deni Gumilang: 
From my observation, the biggest challenge lies in policy coherence within Indonesia's regulatory framework. This framework comprises numerous layers that frequently exhibit misalignment, which often confuses investors and developers.  

Also, our current national strategy, especially in mining and downstream processing, is notably carbon-energy intensive. It might contradict the energy transition goals. Meanwhile, the development of crucial finance tools, such as tax incentives for renewable energy or carbon pricing mechanisms, remains largely questionable. 

At GIZ, we are trying to support more de-risking policies to the situation, as well as designing relevant financial tools like guarantees, mezzanine loans, project development facilities, etc to make investment more attractive. But, the effective implementation of these initiatives necessitates stronger legal backing. 

SIPET Connect: Lishia, what are you seeing in the power sector, particularly around coal phase-out or plant transition efforts? 

Lishia Erza: 
It’s being discussed, but implementation is slow. Companies interested in transitioning—like coal operators—are getting mixed signals from the government. The mechanics of transition deals are still unclear. 

We work closely with the private sector through associations, and a lot of what we hear is uncertainty. Businesses aren’t sure if they should act now or wait. Policy updates sometimes come with little warning or context. 

So at APINDO, we’re creating a platform where businesses can get clarity. We ask them: Do you need to train workers? Talk to funders? Source better tech? We connect them accordingly. The power sector narrative is heavy on the supply and distribution side, but not much on the user side; this is a lopsided conversation between demand and supply side, product and market fit principles are lost. 

SIPET Connect: What about agriculture and nature-based sectors? How do they fit into this conversation? 

Lishia Erza: 
Agriculture is one of the hardest sectors to allocate finance for an energy transition. Most farmers in Indonesia are smallholders—owning less than half a hectare. They’re understandably risk-averse, lack financial documentation, and operate in fragmented markets. 

We try to shift the mindset toward agribusiness. We help farmers think in terms of scaling, documentation, and accessing capital. But even when start-ups come with climate-smart agriculture tech, like AI irrigation or agri-PV, the models often aren’t scalable. Post-harvest is where energy use really spikes—not in the field—so PV investments don’t always make sense unless considered through an integrated economic lens – what crop should be cultivated, what prices can the farm fetch using Agri-PV, what upfront investment and operational costs should farmers consider, and so on. Close to 30% of Indonesia’s workforce work in agriculture sectors – 28% plus. Energy transition conversation should touch the agriculture sector if a third of the country’s workforce is impacted! We’re talking about 40 million people directly or indirectly involved in the transition 

SIPET Connect: And finally, what’s your take on Indonesia’s net-zero targets and the future of transition finance? 

Deni Gumilang: 
Indonesia has officially established a net-zero target for 2060 or sooner, praised the Ministry of Industry expressing an aim for 2050 for industrial sectors. Meanwhile, the progress of the Energy Transition Mechanism (ETM) is also an excellent precedent for achieving early coal plant retirement and leveraging concessional capital, even though its operationalization is still in its discussion phase. More coordination to execute JETP is also critically required among PT Sarana Multi Infrastruktur (Persero) (the Ministry of Finance’s financing vehicle), Perusahaan Listrik Negara (PLN) (the state utility), GoI, and donor entities to achieve greater impact. Concurrently, a strengthening of the legal framework to connect these different dots, particularly about integrating energy regulation and finance, is highly necessary. 

Lishia Erza: 
The good news is we’re finally having the right conversations. Five years ago, nobody was talking about a just transition. Today, banks, municipalities, and national associations are starting to engage. It’s still early—but we’re moving in the right direction, I hope we get there fast enough.  

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Editor’s Note: As Indonesia navigates the complexities of decarbonization, the idea of a just transition—one that supports not only climate goals but also social and economic equity—has taken center stage. This conversation with Lishia Erza highlights a crucial shift: transition finance is no longer just about infrastructure; it's about people, policy, and systems. From enabling financial products that support reskilling, to shaping regulations that de-risk investment, their insights reveal a growing ecosystem of solutions. The road ahead demands deeper policy coherence, greater institutional alignment, and targeted financial innovation—but the momentum is building. 

Asia stands at a pivotal moment to drive the global energy transition by leapfrogging to cleaner, low-carbon technologies. Southeast Asia, in particular, can align economic growth with climate goals through renewable energy adoption, supportive policies, and international cooperation. With targeted investments and inclusive strategies, the region can meet rising energy demand while ensuring a just, sustainable future.

A decade after the Paris Climate Agreement, Southeast Asia’s financial sector is increasingly focusing on supporting investments that contribute to decarbonization. Transition finance has emerged as a critical enabler, bridging the gap between today’s fossil-based economies and the clean energy future that governments and corporations aspire to achieve through their net-zero commitments.

In this exclusive conversation for SIPET Connect, Peter du Pont, Senior Advisor on the GIZ CASE project speaks with Anouj Mehta, Director of ADB’s Thailand Resident Mission. Mehta, who is the architect of the $2 billion ASEAN Catalytic Green Finance Facility (ACGF). shares insights on how transition finance can be scaled up effectively. With extensive experience in structuring financial solutions for green infrastructure, Mehta discusses the realities of mobilizing private capital, the role of development finance institutions (DFIs), and the innovations required to make transition finance work for Southeast Asia.

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SIPET Connect: Transition Finance is gaining traction globally, but how would you define it in the context of Southeast Asia? How does it differ from green or sustainable finance?

Anouj Mehta: Transition finance is fundamentally about mobilizing finance that can incentivize public and private sector entities to make the shift to much more resilient and environmentally sustainable practices than they currently deploy so as to lead to a much lower carbon footprint. This can be across all sectors whether in manufacturing, agribusiness, infrastructure, or services. Unlike green finance for projects that are immediately eligible and sustainable per green taxonomies, transition finance focuses on those hard-to-abate sectors, which require much more support in establishing a pathway towards the final goal of low emissions and resilience.

Southeast Asia has a complex energy landscape. Despite ambitious net-zero targets, the region remains heavily reliant on fossil fuels, particularly coal, which accounts for as much as 40% of power generation in many countries. The challenge is that many businesses, particularly in hard-to-abate industries like steel, cement, and transport, lack access to affordable financing to transition away from fossil fuels. This is where transition finance plays a crucial role. For example, it can facilitate the necessary financial mechanisms to support a range of investments, including:

1. Transition to a renewables energy mix;

2. Grid modernization to integrate intermittent renewables more effectively;

3. Energy efficiency improvements across industrial and commercial sectors;

4. Low-carbon transport systems including electrification of bus and rail networks; and

5. Risk-sharing mechanisms that encourage private investment in decarbonization projects.

This is where derisking or catalytic funds can make a difference. For instance, the ACGF aims to blend sovereign finance with funds from concessional donors so as to derisk green projects and hence attract commercial finance sources.

SIPET Connect: What role do Development Financing Institutions, or DFIs, play in structuring multi-donor transition finance mechanisms?

Anouj Mehta: DFIs are essential in creating viable financing structures that balance risk and return. Transition finance often involves investments that are not immediately commercially attractive, so DFIs could try and mobilize concessional finance, provide risk guarantees, and technical assistance to make these projects bankable.

Take ACGF, for example. We pool resources from multiple partners—ADB, the EU, Green Climate Fund, the UK, Germany’s KfW, and others—to create structured, multi-donor financing programs or projects. This approach ensures that projects in more challenging sectors, which often struggle to attract private capital, receive the bankability enhancement needed to move forward.

Good examples are emerging from the ACGF work which involves blending and derisking such as the Davao Public Transport Modernization Project in the Philippines which is the first project in the country to deploy electric bus fleets at scale, almost 1100 e buses, will service nearly 800,000 passengers daily, and targets a 60% reduction in the city’s urban transport GHG emissions– this could serve as a replicable pilot for the country and the region; other projects with great replication potential include the SDG Indonesia One green finance facility and Thailand focused GSS Bonds + program

SIPET Connect: What are the biggest bottlenecks preventing transition finance from scaling up in Southeast Asia?

Anouj Mehta: The availability of transition capital through locally available finance facilities that can be flexible and affordable is perhaps the biggest challenge. Traditional financing sources have yet to adapt to this need, with either being very commercial and focused on risk-return paradigms that do not allow untested transition innovation or very complicated public finance processes that might be slow in deployment and reach. Three other key challenges are:  

1. Low level of deployment of innovative transition finance instruments such as transition bonds or incentive-linked financing products

2. Lack of clarity especially at SMEs and SOEs on transition pathways and targets that need to be developed

3. There is often regulatory uncertainty, as the policy frameworks for transition finance are still evolving. Governments need to provide clear guidelines and incentives to de-risk investments.

All of this is why collaboration between DFIs, policymakers, and the private sector is critical. Countries that have taken a proactive approach—such as Thailand, which recently issued sustainability-linked bonds—are showing how transition finance can work when financial incentives align with decarbonization goals.

SIPET Connect: How do financial instruments like bonds contribute to transition finance?

Anouj Mehta: Bonds—particularly sustainability-linked bonds (SLBs)—are powerful tools to drive transition finance. Unlike traditional green bonds, which are tied to specific projects, Sustainability-Linked Bonds (SLBs) incentivize companies to meet sustainability targets by linking interest rates to performance. If a company fails to meet its targets, it pays a penalty through higher interest rates.

A case in point is Uruguay’s sustainability-linked bond model, which some of our ADB teams are adapting for under development projects and programs. This model ensures that borrowing costs remain competitive while encouraging long-term sustainability commitments. Similar structures could be applied across Southeast Asia to finance large-scale transitions in energy, industry, and transport.

SIPET Connect: What advice would you give to organizations looking to harness transition finance effectively?

Anouj Mehta: I feel, the change should start first with innovation in the technical approaches needed for your transition programs – whether energy mix or manufacturing process or logistics etc - and then look at what’s needed financially to make these approaches into bankable propositions. Identify the financing gaps and look at what governments and DFIs can offer to mitigate these gaps.

To make transition finance work, companies and governments need to do a few things.

1. Leverage blended finance models, using a mix of grants, concessional funding, and commercial capital to lower overall risk;

2. Demonstrate clear financial returns, so that investors can see a path to profitability, whether through carbon credits, efficiency gains, or regulatory incentives; and

3.  Finally, engage with policymakers early, since policy incentives, such as tax breaks or feed-in tariffs for renewable energy, can make or break a project’s financial viability.

SIPET Connect: Looking ahead, how do you see DFIs shaping transition finance in the next five years?

Anouj Mehta: Development Financing Institutions (DFIs) nationally and regionally, need to act quickly, innovate new financing products and instruments, and help build local capacities. If we’re serious about meeting net-zero targets, we cannot afford to move at the current pace. Some key areas for all development agencies to focus on include:

1. Accelerating approval processes for financing decisions;

2. Expanding risk-sharing mechanisms, such as Guarantee structures and first-loss capital must become standard for high-impact transition projects;

3. Scaling new financial instruments—we need more innovation in structured finance, such as sustainability-linked bonds, transition bonds, and hybrid debt models.

DFIs such as ours can help and I would urge more projects to look at the support available from catalytic funds and facilities such as the ACGF or the ADB’s recently launched Nature Solutions Finance Hub etc. The ACGF is leading the way – it has already impacted almost 50 green projects, catalyzed $ 7 bn of projects and innovating new concepts – whether over 15 thematic bonds already issued, green finance national facilities and more. This is the level of momentum we need to maintain.

Transition finance is not about replacing green finance; it is about complementing it—ensuring that industries and economies that are still carbon-intensive have viable pathways to sustainability. If structured correctly, transition finance can bridge the gap between climate ambition and real-world investment, making net-zero commitments more than just promises on paper.

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Editor’s Note: Transition finance is emerging as a critical tool to bridge Southeast Asia’s green ambitions with financial realities, ensuring that industries can decarbonize without disrupting economic growth. This interview highlights the key challenges—risk perception, slow capital deployment, and policy gaps—while also showcasing practical solutions like blended finance, sustainability-linked bonds, and risk-sharing mechanisms. As the region accelerates its net-zero transition, the insights here reinforce that success will depend on speed, scale, and smarter financial structures that mobilize both public and private capital effectively.

This year’s International Women’s Day highlights the necessity to accelerate gender equality through actions, #AccelerateAction (IWD, 2025). Energy, one of the main GHG emitters, could be instrumental to fill the gap of gender disparity with the right approach to sectoral transformation. In this article, we will explore the nexus of gender and energy, and what actions can be taken to improve the energy sector to be more equitable and inclusive.

UN Women defines gender equality as “the equal rights, responsibilities and opportunities of women and men and girls and boys. It does not mean they will become the same, but their rights, responsibilities and opportunities will not depend on their sex/gender” (Source: UN Women Training Centre)

Gender – Energy interplay

Looking at the smallest unit of society – the family – women often play a central role as care workers, such as cooking, cleaning and taking care of children and elderly family members, especially in the ASEAN context. Providing them with access to clean energy not only prevents exposure to air pollution but also empowers them by leveraging their role from mere end-users to entrepreneurs or leaders for example, installing solar PV on their rooftop (ASEAN Centre for Energy, 2022), particularly women in rural areas who have been identified as a marginalised group. According to the latest ASEAN Gender Outlook, many households still rely on unclean fuels for cooking, particularly in Cambodia and the Philippines, where an estimated 15% and 17% of women, respectively, are at an inappropriate level of respiratory diseases risk due to this activity.

With depleting ecological resources and the climate crisis, the energy sector now requires transformation. Increasing diversity in the workforce and leadership positions has proven to drive more innovation, efficiency and sustainability in the sector. (UN Women, 2023). For instance, in the private sector, firms with more women represented in decision-making positions outperform those with fewer women (IEA, 2021). 

Therefore, integrating gender equality and diversity into the energy transition process should not be up for debate but a default setting.

The Glass Ceiling

Nonetheless, women’s representation in the energy sector remains limited. Globally, Women represent around 32% in the renewable energy sector and 22% in the fossil-based sector (IRENA, 2019). Women are still underrepresented in STEM jobs and senior management levels, constituting only about 14% of leading roles in energy firms (IEA, 2019). In the ASEAN region, women represented only 8% of the energy workforce (ACCEPT, 2024) – therefore the proportion of women in leadership roles would be even less. In terms of working conditions, there is still a 19% wage gap between women and men in the energy sector, which is greater than the non-energy sector. (World Economic Forum , 2022)

Referring to the activity “Women in Energy” where we convened women professionals in Thailand’s energy field to discuss their journey in the sector and the barriers preventing women from working in the field. There were many barriers which ranged from lack of awareness of opportunities (because the energy sector is viewed as STEM dominant) or self-perception (e.g. low self-confidence in their ability to understand technical issues) and technical discouraging working conditions e.g. safety, lack of policies to share care work. Apiradee Thammanomai, Director of the Strategy and Planning Division at the Department of Alternative Energy Development and Efficiency (DEDE), pointed out that “Women are forced to choose between career growth and family responsibilities”. Some women may refuse to take on a leadership role due to societal expectations that women should prioritise the family. These situations may undermine women’s representation in leadership positions in the energy sector, which could result in an unsustainable transition.

Shatter The Glass

Transitioning energy sector, from fossil-based to renewables, is not merely a climate solution but it could be an opportunity to address social disparity.To achieve this goal, mainstreaming gender into energy-related discussions is essential. There are several actions that can be taken by different stakeholders to enhance gender equality in the sector. Below are some examples:

Through Policies:

Gender mainstreaming in energy policy design: in the ASEAN context, the Roadmap on Accelerating ASEAN RE Deployment through Gender-Responsive Energy Policy was formulated in 2022, it aims to close the gender gap in RE sector and attract development finance through gender-responsive public policies. However, it can also be used as a reference to design gender-energy nexus policies. Another tool is a guideline for policymakers developed by the UNEP and UN Women, providing a step-by-step guide on how to integrate gender in energy policies.

Utilising gender toolkit or checklist developed for the energy sector: additionally, the Philippines Department of Energy has developed a Gender Toolkit for the Energy Sector, which equips policymakers and other stakeholders such as donor agencies, and the academic community with a guideline and checklist when designing energy programs or projects and MRV framework to monitor its impact. DOE also implements a policy to improve the number of women’s participation in RE sector by providing capacity building and technical assistance.

Ensuring a proportion of candidates are women or from marginalised groups: by doing so, it would guarantee diversity of the candidates and thus, more access to opportunities for marginalised groups. Indonesia enacted a law (Article 55 of Law 8/2012), that stipulates at least 30 percent of members of the House of Representatives candidates must be women.

Through Finance and Budget:

Inclusive financial support: by having budgets and investment plans that are designed gender-responsive e.g. initiatives to support women entrepreneurs, and Gender-responsive budgeting (GRB) can ensure the distribution of the cost of transition so that women benefit equitably. 

Through Education:

Promote enabling educational policies and programs: insufficient female representation in STEM jobs leads to a lack of female role models, therefore, at an institutional level, enabling policies and programs are required to promote educational and career opportunities for women.

Through the Workplace:

Workplace policies that help alleviate unpaid care work: for instance, flexible working hours, a working from home policy, daycare facilities for employees with young children.

Non-conscious bias training for the hiring unit and managers: tackling gender inequality can start by becoming aware of unconscious bias, which may influence the way we decide.

Energy could be instrumental to tackle societal gaps, including gender disparity, through improving wellbeing, to mainstreaming inclusion and diversity into different levels of decision-making. Addressing gender equality in the energy sector, therefore, requires a systematic approach at all levels by all stakeholders; it is everyone’s responsibility to #AccelerateAction.

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

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?