SOUTHEAST ASIA is witnessing a dramatic shift: foreign capital is flooding into green‑tech markets, while domestic money quietly slips away — redirected toward other Asia‑Pacific opportunities.
This is not a signal of capital shortage, but of return‑driven strategic moves. The phenomenon is already reshaping the region’s clean finance landscape, with long‑term consequences for sovereignty, industrial strategy and climate resilience.
Domestic Capital Is Departing. And Here’s Why
Last year the region’s private green investments jumped 43%, totalling US $8 billion, but startlingly, about 70% of that came from foreign investors. That’s a sharp reversal: in 2023 only around 30% was foreign‑driven.
Why the exodus?
For starters: returns have failed to materialise. Unlike Europe, Southeast Asia lacks a reliable “greenium”- a pricing premium for green‑labelled debt/green bonds – that don’t yield extra value for investors. The region’s bond markets remain fragmented and small; many are dwarfed by what large institutional investors require.
Liquidity is another issue. The typical ASEAN green‑bond market is measured in the low tens of billions — simply too small to absorb large pension‑ or insurance‑fund allocations. On top of that, currency risk is deterring investors: emerging‑market currencies like the rupiah or baht have seen double‑digit depreciation, eroding real returns.
Public‑sector failure compounds these issues. Few sovereign green bonds exist to set credible benchmarks. Some regional issuers have entered, but only to vanish as regulations shifted. Such abrupt reversals sow distrust.
Foreign Money Is Pouring In With a Long Haul Mindset
Against this backdrop, global investors with long-term horizons, ESG mandates and appetite for first‑mover advantage are moving in. The size of the opportunity is vast. Global sustainable‑bond issuance reached a fresh high in 2024 as corporate and official issuers together contributed hundreds of billions of dollars in green and sustainability bonds. (OECD)
For many institutional investors from Europe, North America and East Asia, Southeast Asia represents one of the few regions with untapped potential and a regulatory environment still malleable. Blended‑finance structures backed by development-finance institutions (DFIs) and multilateral development banks (MDBs) further reduce risk, making deals more attractive. Meanwhile, geopolitical strategies such as infrastructure corridors and energy‑transition cooperation, add another layer of strategic incentive.
“We’re positioning now for a $1.5trillion transition wave and want to be first in line.” ~ a senior investment strategist, speaking off the record.
The Strategic Problem: What it Means for Southeast Asia
This swap of domestic money out, foreign money in, may accelerate green-tech deployment in the short term. But over time it carries heavy strategic costs.
Wealth creation is flowing offshore. Domestic savers and pensioners aren’t building local green capital, but foreign entities are reaping the gains.
Vulnerability to capital flight deepens. Once foreign appetite wanes, whether due to global interest‑rate shifts, ESG backlash, or geopolitical headwinds, entire green‑finance markets could dry up.
Industrial policy and job creation get sidelined. Foreign money often goes to finance raw infrastructure or project-level green assets, not to build local supply chains, capability or technology industry.
That leaves countries stuck as resource/service zones instead of becoming innovation hubs.
Policy sovereignty erodes. When funding relies on foreign mandates and international investors’ time horizons, domestic governments lose room to shape strategic outcomes.
To Break the Pattern: Policy Must Rebalance for Domestic Capital
To reverse this trend to reclaim financial and industrial leverage, global best practice suggests several reforms:
- Issue sovereign green bonds. Governments need to lead, not just corporates. Sovereign green bonds create pricing benchmarks and reduce risk for local investors.
- Adopt harmonized green taxonomies across ASEAN. A shared definition of “green” boosts transparency and helps scale regional green‑finance markets.
- Enable a “policy‑driven greenium.” Lower interest rates, tax incentives or subsidies for green instruments could make them competitive with conventional bonds.
- Mandate domestic co‑investment in blended‑finance deals. For any major green project backed by DFIs, require a portion of capital to come from local pension funds or domestic banks.
- Establish national green‑infrastructure funds. Long duration, local‑token funds can channel domestic institutional capital into energy, water, waste, hydrogen and circular‑economy projects — preserving capital, building domestic industry and aligning with net‑zero goals.
The Bottom Line — Green Finance Needs Local Roots, Not Just Foreign Watering
Southeast Asia is at a crossroads. Foreign capital has injected momentum, but relying solely on it is a strategic risk. The region could end up with gleaming solar farms and wind turbines, but few domestic investors, little local capability, and few of the long‑term industrial gains that come with a mature clean‑tech ecosystem.
If Southeast Asia wants to own its green future, from hydrogen to waste‑to‑energy, from grid upgrades to circular economy hubs, it needs to root finance in homegrown capital. Only then can the region turn climate ambition into climate‑resilient growth.
A point in case is the Dragon Capital & Adani Green Energy (and 26 other foreign & Vietnamese investors) — Alarm over Retroactive Policy Changes in Vietnam
A coalition of 28 foreign and Vietnamese investors, including Adani Green Energy and Dragon Capital, sent a letter to Vietnamese authorities in March 2025 warning that planned retroactive changes to feed-in tariffs (for wind and solar projects) could jeopardise “over US $13 billion” of investments.
According to the letter: “Such a move could result in equity write‑offs of nearly 100% for the affected projects,” threatening both local and international capital and undermining confidence.
Further, a follow-up petition (May 2025) reveals that state-owned utility EVN began withholding or reducing payments to some solar/wind farms, applying provisional tariffs — leaving firms facing loan defaults, cash-flow shortfalls and financial distress.
The Financial Times reported that a foreign investor (speaking anonymously) stated bluntly:
There is not a chance in hell of any serious funds being attracted into Vietnam’s power sector.
This case highlights the strategic problem of relying heavily on foreign capital — once policy risk emerges, capital can freeze, undermining both green‑tech deployment and domestic investor confidence.
Australia holds a solution: blended‑finance push via Financing Asia’s Transition Partnership (FAST‑P), International Capital and De‑Risking for SEA
In 2025, Export Finance Australia (EFA) committed A$100 million to FAST‑P, part of a broader regional push to mobilise capital for clean energy, energy storage, EV charging infrastructure and sustainable transport across Southeast Asia.
FAST‑P aims to deliver up to US $5 billion in capital deployment — a structured way to channel international money into the region while using concessional or de‑risked financing models to attract private investors.
For many international investors — constrained by ESG mandates, long-term horizons, and global capital to deploy — this kind of blended‑finance vehicle provides a relatively lower‑risk entry point into emerging‑market clean infrastructure. As one fund manager described it, blended finance “matches different types of funding from governments, philanthropists and private investors to mobilise capital for sustainable development.”
FAST‑P and similar instruments represent the “why foreign investors are flooding in” side of the swap, but structured in a way that arguably could, if properly regulated, include or be partly directed to domestic investors and build local capacity.
Future Now Green News is a forward-thinking media platform dedicated to spotlighting the people, projects, and innovations driving the green & blue economy across Australia, Asia and Pacific region. Our mission is to inform, inspire, and connect changemakers through thought leadership and solutions-focused storytelling in sustainability, clean energy, regenerative tourism, climate action, and future-ready industries.
