Asia has long stood at a developmental crossroads. Fossil fuels have powered the region’s rapid industrial and economic growth over the the past few decades, but this growth has come at a steep environmental cost. An increasing spate of extreme weather events and global pressures have resulted in a thorough re-evaluation of the region’s dependence on fossil fuels. Green finance offers the region a promising path to building a sustainable future, but significant obstacles remain before it can truly reshape the growth model. Asian industry has for long relied on coal, oil and gas. According to IRENA, the continent accounts for over half of the world’s energy consumption, and 85% of its energy needs are met by fossil fuels. This has resulted in very high social and environmental costs, with several local communities facing a climate whiplash, resulting in floods, prolonged period of drought and an increased frequency of storms. This, in turn, has resulted in significant human and economic loss. A focus on greening Asia’s governments know they need to act urgently, and have, over the years sought to find ways to reduce their economies’ dependence on fossil fuels. The financial markets, encouraged by government direction and increased investor interest, are now supporting the drive towards greener sources of energy. Green finance is growing rapidly in the region, with a surge in green bond issuances. Green, social, sustainable, and sustainability-linked bond (GSSSB) issuance in Asia Pacific was expected to rise by 10% to reach US$260 billion in 2024, according to S&P Global, with growing investor interest.Some economies in Southeast Asia—namely Indonesia, Malaysia, Singapore and Thailand—are leading the charge, with their regulators looking to create conducive conditions for capital raising and to build credibility to encourage greater private sector participation. This has been possible with their governments designing frameworks that are in keeping with internationally-recognised standards. Balancing growth and equityWhile countries with deep financial markets can raise capital domestically, and while those with established networks and strong credibility can raise capital from overseas investors, what about smaller, less-developed economies that don’t meet the cut on both counts?While a Singapore or a Malaysia can successfully raise capital through green bond issuance, the same might not be the case for a Cambodia or a Nepal. Economies with less mature financial markets can find themselves left to their own devices when it comes to raising capital for renewables development. This is a challenge green finance will have to overcome for it to be truly transformational. There also arises a separate question around the protection of workers and communities. Even when countries are able to employ green finance to meet their energy transition needs, this transition needs to protect people and communities that depend on the traditional energy sector for their livelihoods. It is therefore not enough to simply raise capital for the purpose of switching between energy sources. There needs to be coordinated action between businesses and policymakers to see to it that workers—say from coal plants that are being retired—are supported either through retraining programmes or the provision of social safety nets. In other words, the green transition must be accompanied by a worker transition. Green finance must be able to balance greening, financial returns and social equity for it to be truly sustainable. Projects should be able to create opportunities for communities that have depended on fossil fuels. In Asia, the economies of Indonesia and India offer lessons. Indonesia is one of the world’s biggest coal exporters, but its government is committed to change, with its government stating it aims to reduce its greenhouse gas emissions by 31.89% (unconditional) and 43.2% (conditional) by the year 2030. Similarly, India has committed to achieving 450 gigawatts (GW) of renewable energy capacity by the year 2030.Ambitious programmes and targets such as these can result in a substantial displacement of workers from traditional sectors, resulting in the need to create vocational training programmes for them. These programmes will be essential to ensuring that the green transition does not leave them behind. There are encouraging developments to be seen, with some green bonds being structured in a manner that includes community development components. The linking of financial returns with social goals is imperative to create a fairer energy system. The path aheadThe green transition presents a unique challenge for Asian economies. Although green finance is integral to the green transition, it cannot remain isolated from social objectives. The key challenge for policymakers and financial market stakeholders is to create conditions that are conducive to drawing more investment to fund the region’s energy transition, but to do so with one eye on the overall sustainability of this green transition. The green transition must extend beyond merely greening energy; it must pave the way to a more sustainable future overall. This means finding the right balance between economic growth and social equity.