Perceptions of climate-related investment risk in Southeast Asia’s power sector

The paper finds a significant gap between the necessity of integrating climate risks and actual investor practice in Southeast Asia's power sector. While physical risks are generally well-understood and factored into due diligence, transition risks—including policy, technology, and reputational risks—are often ignored or superficially addressed. Investors frequently use long-term Power Purchase Agreements (PPAs) to shift climate-related liabilities to state-owned utilities. The study identifies institutional habits, the need to deploy large amounts of capital quickly, and limited financial governance as primary barriers to shifting investment from fossil fuels to renewables.

• There is a substantial disconnect between the need for climate risk integration in investment decisions and the current reality in Southeast Asia's power sector, where such risks are either ignored, considered insignificant, or only superficially integrated.
• Physical climate risks, such as extreme weather, are relatively well-understood by investors and are integrated into due diligence and environmental and social impact assessments, potentially increasing project costs by 10–15%.
• Investors mitigate policy, regulatory, and technology risks by using 'ironclad' long-term Power Purchase Agreements (PPAs) that shift the financial liability for future climate regulations or cost changes to state-owned utilities.
• Divestment and reputational risks are not primary drivers for local or regional investors due to a lack of transparency and stakeholder pressure, although international asset managers and corporate green procurement requirements are exerting indirect pressure.
• Stranded assets are viewed as a serious risk for the next 20 years, with the Philippines having an estimated 10GW of planned coal assets worth US$ 21 billion at risk, though investors in state-dominated markets believe governments will socialize these losses.
• Investment in fossil fuels persists due to institutional habits, a perception that renewables offer lower returns, and the pressure on large investors to deploy massive amounts of capital into familiar, large-scale projects.

APA

du Pont, P., Gueguen-Teil, C., & Johnson, O. (2020). Perceptions of climate-related investment risk in Southeast Asia’s power sector. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2020/01/sei-working-paper-2020-climate-investment-risk-southeast-asia-4.pdf

Chicago

du Pont, Peter, Cannelle Gueguen-Teil, and Oliver Johnson. Perceptions of climate-related investment risk in Southeast Asia’s power sector. Stockholm Environment Institute, 2020. https://www.sei.org/wp-content/uploads/2020/01/sei-working-paper-2020-climate-investment-risk-southeast-asia-4.pdf.

Wikipedia

{{cite report |last1=du Pont |first1=Peter |last2=Gueguen-Teil |first2=Cannelle |last3=Johnson |first3=Oliver |title=Perceptions of climate-related investment risk in Southeast Asia’s power sector |publisher=Stockholm Environment Institute |date=January 2020 |url=https://www.sei.org/wp-content/uploads/2020/01/sei-working-paper-2020-climate-investment-risk-southeast-asia-4.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{dupont2020perceptions, author = {du Pont, Peter and Gueguen-Teil, Cannelle and Johnson, Oliver}, title = {{Perceptions of climate-related investment risk in Southeast Asia’s power sector}}, institution = {Stockholm Environment Institute}, year = {2020}, month = jan, url = {https://www.sei.org/wp-content/uploads/2020/01/sei-working-paper-2020-climate-investment-risk-southeast-asia-4.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }