Moody’s head of sustainable finance: Asia is embracing a ‘pragmatic transition’ on energy

An “erosion of multilateralism” is changing Asia’s push for sustainability, as countries pursue individual goals of energy security and supply chain resilience instead of “virtue signalling,” says Rahul Ghosh, global head of sustainable finance and emerging markets at Moody’s Ratings.

“Ten years ago, the world was aligning around consistent climate policies, but now we’re starting to see a bit of divergence,” he says, as countries instead pursue what he dubs a “pragmatic transition,” one that balances sustainability with energy security and economic affordability—usually by allowing traditional fossil fuels to play a role.

Geopolitical conflict has driven much of the reassessment of the green transition.

First, Russia’s invasion of Ukraine in 2022 caused a surge in fuel prices, causing an energy crisis throughout much of the developing world.

February’s U.S. strikes on Iran and the resulting closure of the Strait of Hormuz also cut Asia’s supplies of oil and gas, reiterating to the region’s governments just how much they relied on energy from a volatile Middle East.

Asian governments are now pursuing a range of energy options to wean themselves off Middle Eastern energy: Investing more in renewable energy and nuclear power; finding alternate sources of oil and gas, like the U.S.; and, perhaps most concerningly, returning to coal power generation.

On Aug.

25, Japan unveiled detailed plans to accelerate its green transformation , including building up to five nuclear reactors in the 2040s, and 14 in the 2050s.

“The Government of Japan is now undertaking various measures as it makes all efforts to ensure a stable supply of energy and critical goods to safeguard the lives and livelihoods of the Japanese people,” Japanese prime minister Sanae Takaichi said during a press conference in April.

“Fuel supply shortages and supply-chain disruptions in Asia…result in major negative societal and economic impacts for Japan.” Singapore, too, recently committed 800 million Singapore dollars ($631 million) to supporting research on low-carbon energy generation and decarbonisation technologies, in hopes of slashing national greenhouse gas emissions to between 45 million and 50 million tonnes of CO2 by 2035.

“We are significantly increasing investments in promising solutions to reduce power sector and industry emissions, and at the same time, to ensure a reliable and resilient power system,” Tan See Leng, Singapore’s minister-in-charge of energy, science and technology, said during a parliamentary session on March 2 .

Some Asian countries are also deepening their reliance on fossil fuels.