Looi Teck Kheong is PublicPolicyAsia Advisors’ lead ESG consultant (Asean). He was formerly the assistant director of market integration for the Asean Economic Community and the concurrent head of consumer protection, competition and intellectual property rights division at the Asean Secretariat (2019-2022). He was admitted as an advocate and solicitor of the Supreme Court of Singapore in 1990.
The conversation around ESG in Asean has shifted decisively from “if” to “how”. After a year defined by accelerated policy articulation—culminating in the recent flurry of national net-zero roadmaps and investor mandates—2026 is poised to be the year of implementation. It is a critical inflection point where high-level aspiration must meet granular, on-the-ground reality.
As someone deeply involved in shaping regional regulatory frameworks, I see 2026 as a strategic juncture demanding integrated, impactful action. Success will hinge on Asean’s ability to turn its foundational documents—its taxonomies, roadmaps and plans of action—into unified commercial and political leverage.
The policy infrastructure laid in 2025 creates tangible, high-impact opportunities for the region in 2026. These opportunities are not theoretical; they are backed by official regional outputs designed for immediate action.
Harmonisation drives interoperability
The primary opportunity is the move from mere regional coordination to genuine interoperability. The multi-tiered approach introduced in Asean Taxonomy for Sustainable Finance Version 2 (AT V2), which was released in 2023, is a masterstroke of inclusive policy with its “Green” tier benchmarked to the 1.5°C Paris Agreement target and its “Amber” tiers designed to promote transitional activities. This structure, which recognises the diversity in economic development and infrastructure maturity across Asean member states, is critical to unlock cross-border investment.
In 2026, we will see national regulators begin to explicitly map their domestic taxonomies (e.g., Singapore-Asia Taxonomy for Sustainable Finance, Malaysian Taxonomy on Sustainable Finance) against the Asean framework. This alignment will drastically lower the compliance burden for regional businesses and attract global investors seeking clarity on what constitutes a “green” asset in South-East Asia. This harmonisation is the administrative key to unlocking billions in capital.
Asean Power Grid and green energy trade
The single biggest opportunity for both climate mitigation and economic resilience lies in the accelerated development of the Asean Power Grid (APG). The recently endorsed Asean Plan of Action for Energy Cooperation (APAEC) 2026-2030 sets ambitious new targets: aiming for a 30% share of renewables in the primary energy mix and a 45% share in installed power capacity by 2030. This is a significant increase from prior targets and signals a major shift.
Guided by the Asean Renewable Energy Long-Term Roadmap (RE LTRM), 2026 must see major infrastructure progress. The APG, which facilitates multilateral power trading across countries like Laos, Thailand, Malaysia and Singapore, is the engine of this transition.
For instance, the ability for Singapore to import low-carbon electricity from renewable sources in Indonesia or Vietnam through interconnections transforms the energy security and decarbonisation prospects of the entire region. This move will not only de-risk supply chains from volatile fossil fuel markets but also solidify Asean’s position as a future renewable energy trade hub.
Green finance and climate resilience
Beyond conventional green bonds, 2026 will see the maturation of innovative financing tools. The challenge of phasing out coal in South-East Asia—home to some of the world’s youngest coal fleets—requires bespoke financing. A critical feature introduced in AT V2 was its incorporation of coal phase-out criteria, providing the essential framework for instruments like the Just Energy Transition Partnership (JETP) in Indonesia and Vietnam to mobilise over US$35bil (RM142.8bil) in private and public finance.
Furthermore, the role of Intellectual Property (IP)-backed financing for ESG-driven enterprises, which I have actively championed, will be critical in unlocking capital for high-growth, innovative GreenTech SMEs. This mirrors US tech success, where IP intangibles (90% of S&P 500 value) propelled valuations to trillions for firms like Nvidia and Apple via patent-driven revenues. The blending of public and private funds for climate adaptation projects—from resilient agriculture to sea-level defence infrastructure—will become a necessity, particularly in vulnerable archipelagic nations.
Challenges: Gaps in governance and inclusion
To realise these opportunities, Asean must confront equally formidable internal and external challenges, particularly concerning implementation and inclusion.
Uneven ESG adoption
The primary hurdle remains the uneven pace of ESG adoption. While major public-listed companies are driven by institutional investor mandates and mandatory reporting in Singapore and Malaysia, the vast ecosystem of small and medium enterprises (SME)—which constitute over 90% of businesses and a substantial portion of employment—lacks the capacity, resources, and often, the regulatory push.
For the sustainable transition to be truly inclusive, it must reach the SME segment. This requires a focused effort on capacity building and the development of simplified, localised tools. My work on the Asean Sustainable Consumption Toolkit aimed to address this by making ESG principles practical and relevant to consumer-facing businesses, linking sustainable practices directly to market access and consumer trust, rather than just regulatory compliance.
Governance deficit and greenwashing
The biggest threat to investor confidence in 2026 is the persistent gap in governance and the spectre of greenwashing. While disclosure is increasing, the quality, comparability and independent verification of non-financial data remain highly variable. The lack of standardisation in assurance creates a breeding ground for misleading claims.
This challenge is twofold. Internally, companies must institutionalise ESG by elevating the chief sustainability officer (CSO) role to a truly influential, board-level position—not merely a reporting function. Externally, regulators need to enforce stricter standards on data assurance.
A particular focus must be placed on the Social Aspects of the Asean Taxonomy, ensuring that compliance with core criteria like the prevention of forced and child labour is not simply a “tick-box” exercise but is backed by robust supply chain due diligence, particularly in high-risk sectors like manufacturing and agriculture. Strong governance is the firewall against reputational and financial risk.
Geopolitics and just transition
Finally, geopolitical uncertainties will continue to test Asean’s resilience. Global supply chain shifts and trade protectionism can disrupt the flow of essential green technologies, such as solar panels and battery components.
Furthermore, the delicate balance of the Just Transition remains a core domestic challenge. While the Asean Taxonomy offers a framework for coal phase-out, the socio-economic impact on communities dependent on these industries is immense. The transition must be just: It must include retraining programmes, social safety nets and local economic diversification to prevent massive job losses and social unrest. Policy decisions in 2026 must be framed not just by carbon metrics, but by the Asean Sustainable Development Goals (SDG) Indicators Progress Report, ensuring that energy transition drives inclusive growth and poverty reduction (SDG 1 and 8), not just climate action (SDG 13).
Asean Community Vision 2045
The groundwork has been laid. The frameworks are in place. 2026 is the year Asean’s leaders, financial institutions and business community must unite to aggressively implement these blueprints.
We must move beyond fragmented national efforts to a coherent, unified regional approach, one that leverages the collective market power of a 680-million-strong bloc.
By focusing on the decisive actions that bridge the governance gap, empower SMEs and realise the potential of the regional power grid, Asean can confidently solidify its position as a global leader in sustainable growth and, critically, ensure the successful realisation of the Asean Community Vision 2045.
The future of a resilient, prosperous and sustainable South-East Asia starts now.
