The author, Helen Wong, is a managing partner at ACV Capital, a private equity investment firm backing high-growth businesses across Southeast Asia.
For much of the past two decades, Southeast Asia’s growth has been supported by relatively predictable energy costs. While the price has been a high carbon intensity factor relative to the rest of the world, attention to changing our energy mix has ebbed and flowed with the need to drive economic growth through low energy costs.
With the ongoing war in Iran threatening energy and food security, we examine the implications that extend beyond energy markets, including inflation, food systems, and capital allocation.
On Earth Day, the conversation is moving beyond sustainability toward economic resilience.
Recent geopolitical tensions, including the risk of prolonged conflict involving Iran, have reinforced this change. The impact is not limited to oil prices. It is feeding through to broader economic conditions, from rising input costs to increased fiscal pressure across emerging markets.
Indonesia, for example, initially allocated around $22 billion for 2026 energy subsidies, but the Iran war necessitated an additional $6 billion to maintain current fuel prices. Such pressure is straining the fiscal budget, which was already close to breaching the 3% legal limit at the end of 2025.
Estimates from the Asian Development Bank suggest that a sustained Middle East conflict could reduce growth in developing Asia while pushing inflation higher. At the same time, the International Monetary Fund’s (IMF) baseline scenario assumes a near 20% increase in global energy prices in 2026.
For Southeast Asia, where several economies remain structurally dependent on imported fossil fuels, these dynamics are becoming increasingly visible—and more consequential for economic stability.
Energy dependence as a structural vulnerability
The region’s exposure to global energy markets is not new, but it is becoming more material.
Indonesia, despite its history as an energy producer, now faces a widening gap between domestic oil production and consumption.
The Philippines remains highly dependent on imported fuels, with fossil fuel imports accounting for approximately 6.1% of GDP and more than half of the total energy supply. The country declared a national emergency as its oil reserves stood at less than seven weeks. Across the region, fossil fuels continue to dominate power generation, reinforcing sensitivity to global price movements.
The result is a recurring pattern. External shocks translate into higher domestic energy costs, feeding into inflation and reducing economic flexibility. Governments often respond through subsidies or price interventions to stabilise markets, but these measures carry fiscal implications and are difficult to sustain over time.
The IMF has noted that such interventions, while effective in the short term, can become costly and distort longer-term market dynamics.
In effect, the region is absorbing the cost of energy volatility through both higher import bills and fiscal responses. What was once manageable is becoming increasingly structural.
From energy markets to food systems
The recent Iran war has also had implications beyond energy price shocks. It has reminded us of the risks of food insecurity.
Fertiliser prices have surged by up to 50%, driven by the disruption of critical shipping routes in the Strait of Hormuz and the halt of major production facilities. Countries such as Indonesia and the Philippines rely significantly on imported fertilisers, exposing agricultural systems to supply disruptions and price fluctuations.
The consequence is a broader inflationary effect that extends beyond fuel. Rising input costs affect agricultural productivity, food prices, and even food security. The agricultural sector in the region is mostly dependent on smallholder farmers, who are already impacted by climate change.
This convergence is reshaping the context in which energy policy and climate transition are being considered. The discussion is no longer limited to emissions or sustainability targets. It is increasingly tied to economic resilience and stability.
A transition is underway—but not yet aligned with risk
There are clear signs that Southeast Asia is moving toward a more diversified energy mix.
Clean energy investment in the region reached $47 billion in 2025, up from $30 billion a decade earlier, and now accounts for nearly half of total energy investment. Governments are setting more ambitious renewable energy targets, and private capital is beginning to participate more actively in the sector.
However, legacy systems remain in place. Coal continues to play a central role in power generation, with substantial capital already committed to long-lived assets. This creates inertia, slowing the pace at which new technologies can scale.
The gap between rising risk and the pace of transition is becoming more apparent.
Closing that gap will require not only capital, but consistent execution across multiple layers of the energy system.
Execution at the company level
The transition is increasingly being defined by how effectively solutions can be implemented on the ground.
In Indonesia, on the renewable energy front, Xurya has focused on enabling adoption within the commercial and industrial segment by removing upfront cost barriers through a zero-capex rooftop solar model. By the end of 2025, the company had delivered more than 300 solar projects and secured over 200 MWp of capacity across the country.
Its expansion into hybrid off-grid systems and independent power producer (IPP) projects reflects evolving demand from industrial users. Renewable energy is no longer viewed solely through a sustainability lens, but increasingly as a means of managing cost exposure and ensuring supply reliability.
On the electric mobility front, moving to EVs (electric vehicles) from ICE (internal combustion engine) vehicles provides a better total cost of ownership (TCO), while lowering carbon emissions. At the same time, it will lower the subsidies that the Indonesian government spends on fuel subsidies. Our portfolio company Otoklix provides maintenance and repair services to EV brands such as VinFast and Geely, while our logistics investee, Kargo, has rolled out EV trucks, aiming to be 100% EV by 2035.
At the same time, resource efficiency is emerging as a parallel component of the transition.
According to S&P Global Energy, virgin plastic prices have spiked since the breakout of the Iran war, increasing the competitiveness of recycled plastic. Waste4Change is involved in the collection, sorting, upcycling, and recycling of plastic waste, which can help to mitigate cost pressures.
Over the past decade, the company has collected nearly 65 million kilograms of waste and recycled more than 14 million kilograms of materials. Its operations have contributed to emissions reduction while creating economic value through job creation and resource recovery. The company’s sustained growth reflects increasing demand for scalable solutions that address both environmental and operational challenges.
These examples illustrate a broader shift. Climate-related solutions in Southeast Asia are moving beyond early-stage adoption into more established, infrastructure-like business models that address real economic constraints.
Reframing the role of climate investment
The implications for capital allocation are becoming clearer.
Decarbonising power systems across major Asian economies, including Indonesia, Vietnam, and the Philippines, will require an estimated $9 trillion in investment over the next two decades.
Diversified renewable energy systems, supported by storage and grid development, can reduce reliance on imported fuels and mitigate exposure to global price volatility. In this sense, the transition is not only an environmental objective but a structural adjustment toward greater resilience.
For investors, this reframes climate from a thematic allocation into a core component of risk assessment. In markets where external dependencies are high, energy and resource systems increasingly influence long-term returns.
A narrowing window for capital
Southeast Asia is entering a period where external shocks are becoming more frequent and more interconnected.
Energy volatility, supply chain exposure, and food system pressures are reinforcing each other, creating a more complex operating environment for both governments and businesses.
At the same time, the region has significant renewable potential, improving policy frameworks, and a growing ecosystem of companies capable of executing at scale.
The transition toward more resilient energy and resource systems is already underway. The question is whether it can progress at a pace that matches the risks.
For investors, this is no longer a distant consideration. It is an active component of how capital is being evaluated and deployed across the region.
