Financing Indonesia’s industrial transformation through Net Zero Industrial Precincts

Southeast Asia is entering a defining period of economic growth. 

As manufacturing expands and global companies diversify their supply chains, the region is attracting increasing investment. In 2024, investment in ASEAN reached US$226 billion. 

Today, Southeast Asia accounts for 6.4 per cent of global economic output, reflecting its growing importance in the world economy.

For Indonesia, this presents an enormous opportunity. But it also raises an important question: how can the country continue to grow while building a more resilient, low-emissions economy?

Speaking at the Maybank Indonesia Sustainable Finance Forum in June, Climateworks Centre Chair Sharan Burrow AC highlighted that economic growth and climate action need not be viewed as competing priorities. Instead, they can advance together, with finance playing a central role in making that happen.

Growth can be matched with cleaner industries

Economic growth across Southeast Asia has been accompanied by rising energy demand. 

Today, much of that demand is met by fossil fuels, meaning that economic output and carbon emissions continue to increase together.

Industry and transport remain the biggest drivers of energy consumption across the region. These sectors are also essential to economic development, supporting manufacturing, exports, jobs and trade. 

The aim, Ms Burrow said, is therefore not to slow industrial growth, but to ensure it becomes cleaner and more efficient.

Recent geopolitical tensions have demonstrated how economies remain vulnerable to fluctuations in global energy markets. 

Higher fuel prices and supply shortages increase production costs, disrupt supply chains, and ultimately affect households and businesses alike.

Building industries that rely on cleaner and more reliable sources of energy is increasingly becoming an economic necessity as much as an environmental one.

Finance can turn ambition into action

New electricity infrastructure, cleaner manufacturing processes, energy-efficient technologies and upgraded industrial facilities all depend on long-term financing. 

Financial institutions, therefore, play a critical role in determining how quickly industries can decarbonise.

This is also a significant commercial opportunity. 

Around the world, governments are creating clearer frameworks that help investors identify projects that support the transition to lower-emissions economies. 

These frameworks reduce uncertainty and provide greater confidence for investment.

For banks and investors, financing industrial decarbonisation is not simply about managing climate risks. It is about supporting industries that will remain competitive in the decades ahead while unlocking new markets for growth.

As Burrow noted, ‘the transition represents one of the largest investment opportunities of our time.’

A new approach through Net Zero Industrial Precincts

One of Climateworks’ key initiatives in Indonesia is the Net Zero Industrial Precincts (NZIP) program.

Rather than focusing on individual actors, the NZIP program supports industries in the same industrial area to reduce emissions together. 

It combines decarbonisation projects, shared energy and utility infrastructure, and an enabling ecosystem of policies, financing and collaboration. 

This coordinated approach can lower infrastructure costs, improve efficiency and give investors greater confidence by creating integrated industrial ecosystems rather than isolated projects.

Climateworks has identified four industrial regions with strong potential to become Indonesia’s first net zero industrial precincts: Halmahera, North Sumatra, Tuban and Cilegon. 

Together, these regions represent strategic export industries, including nickel, iron and steel, aluminium and cement. 

Working closely with Indonesia’s Ministry of Industry, Climateworks is developing transition pathways for each precinct and identifying practical opportunities to reduce emissions while maintaining industrial competitiveness. 

The work will also produce investment prospectuses that clearly map potential projects and connect them with appropriate financing options.

The goal is to bridge a challenge often raised by both financiers and industry. Banks frequently say there are not enough investment-ready projects, while project developers argue that financing remains difficult to secure. 

By bringing government, industry and financial institutions together around shared regional plans, the NZIP program aims to close this gap and create a stronger pipeline of investable opportunities.

Building Indonesia’s low-carbon industry

Indonesia has many of the ingredients needed to become a leader in low-carbon industrial development. It has abundant natural resources, growing manufacturing capacity and increasing investor appetite. 

What is needed now is a coordinated pipeline of investable opportunities that align infrastructure, industry and finance.

The NZIPs program provides a practical pathway to achieve this by bringing together government, businesses and financial institutions to support industrial regions as integrated ecosystems.

The opportunity extends beyond reducing emissions. 

Cleaner industrial precincts can strengthen Indonesia’s competitiveness, attract long-term investment and position the country to supply the growing global market for lower-carbon products.

Southeast Asia’s growth story is already underway. The decisions made today about where and how capital is invested will determine whether that growth remains resilient and competitive for decades to come.

For Indonesia, financing the transition through initiatives such as net zero industrial precincts is not only an environmental imperative, it is a commercial opportunity towards building the country’s future prosperity.

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