The problem
Buildings account for 21.3% of Thailand's operational energy use, around 23% of Indonesia's national energy consumption rising towards 40% by 2030, and roughly 17% of India's emissions before embodied carbon, which pushes the figure to between 25% and 32%. In each market the mitigation opportunity is understood and the technology exists. The binding constraint is financial: the capital needed to build and retrofit to a low-carbon standard is not flowing at the required scale, and the reasons are strikingly consistent across three very different economies.
Who this is for
This is written for development finance institutions, commercial banks and housing-finance lenders active in Southeast and South Asia, and for the ministries designing the codes and incentives that shape their pipeline. It assumes familiarity with green mortgages, ESCO models and thematic bond structures.
Why this matters now
The window is a construction one. In India, about 70% of the building stock that will exist in 2030 has not yet been built, and cooling demand is projected to rise roughly fourfold to 585 TWh by 2040. Financing decisions taken in this decade lock in the emissions profile of that stock for its operating life, which is why the question is not whether to decarbonise existing buildings but how to finance the ones going up now to a standard that does not require expensive retrofit later.
Around 70% of the buildings India will have in 2030 are yet to be constructed, which makes new-build financing standards, not retrofit, the decisive lever. Source: GGGI India Country Report (2025).
Three markets, three stages of maturity
Thailand has the most developed financial sector of the three. Its Building Energy Code is mandatory for large commercial and public buildings, its 2025 Taxonomy Phase II now defines criteria for buildings and real estate, and the market has shown it can absorb scale: One Bangkok secured a USD 1.44 billion green loan across five banks in November 2024, while Bangkok Bank's Bualuang Green Home Loan prices a lower rate against rooftop solar. The unmet segment is small and medium buildings, which sit largely outside the mandatory code, and the SME developers who lack the collateral to borrow. Indonesia is at an earlier stage: green finance is under 5% of total bank credit, only 98 buildings hold GBCI certification against thousands in comparable markets, and its estimated green building investment need reaches USD 209 billion by 2030. Its instruments are being built out through sovereign green sukuk, BRI's KPR green mortgage, and the Indonesia Green Affordable Housing Programme. India combines the largest volume with the strongest policy architecture: its 2024 Energy Conservation and Sustainable Building Code is now mandatory and enforced in 25 of 36 states, its Building Energy Efficiency Programme retrofitted more than 10,000 public buildings between 2017 and 2022 through an ESCO model, and its Perform, Achieve and Trade scheme lets efficiency gains be traded as certificates. India led the world in LEED Zero projects in 2023.
The mechanism: what actually mobilises private capital
Across the three reports the same toolkit recurs, applied at different depths. Green mortgages lower the cost of capital for individual buyers; green bonds and sukuk channel institutional money to large projects; partial risk guarantees and blended structures de-risk lenders wary of unfamiliar green exposure; and ESCO models let a utility or service company bear the upfront cost and recover it from metered energy savings, as India's BEEP and Thailand's cooling-focused RAC NAMA both demonstrate. Fiscal levers matter too: Bangkok grants additional buildable floor area for certified green buildings, and India's UJALA appliance programme used government-scale procurement to drive down the unit cost of efficient technology for everyone.
The shared barriers
Four constraints appear in Thailand, Indonesia and India alike. Code enforcement is uneven, whether by building size, province or state, so lenders cannot rely on a standard being met. There is a maturity mismatch between the 8 to 15 year payback of efficiency investments and the short-term deposits that fund banks. SMEs and low-income developers lack the collateral to pledge. And there is a shortage of trained energy auditors, appraisers and ESCO operators to originate and verify projects. None of these is solved by a new financial instrument; each is solved by the institutional plumbing around it.
Risks, limitations and what a robust approach requires
- Legal adoption is not compliance. A code mandatory in 25 of 36 states, or for large buildings only, still leaves most of the pipeline unregulated; financing standards should not assume enforcement that does not yet exist.
- Embodied carbon is the next frontier. Only India's updated code begins to address the cement and steel that dominate a building's upfront emissions; instruments focused solely on operational energy miss a growing share of the impact.
- Cooling demand can outrun efficiency gains. With cooling electricity demand set to multiply, efficiency finance that ignores refrigerant transition and passive design addresses only part of the load.
- Investment-need figures are dated. Headline numbers such as USD 209 billion for Indonesia rest on 2016 baselines and likely understate current requirements once embodied carbon is counted.
Conclusion
The three country reports point to one conclusion: the decisive work in building decarbonization finance is not inventing instruments but making the existing ones bankable, by tightening code enforcement so a green standard can be relied upon, aggregating small projects into portfolios institutional lenders will underwrite, and closing the perception gap on a cost premium that is nearer 2% than 10%. A DFI or bank entering these markets should back the enforcement and pipeline-aggregation layer first, because that is what turns a mature toolkit into deployed capital.