Building on the GEDSI gap analysis in Part 1, this report explores how investment incentive mechanisms can be designed to support more inclusive foreign direct investment outcomes in ASEAN. It argues that incentives are not neutral policy tools: their design influences investor behaviour, local participation in value chains, access to employment and skills development, and the distribution of investment-related gains and costs. The report introduces a practical continuum for integrating GEDSI considerations into incentive design, ranging from approaches that are GEDSI-blind to those that are GEDSI-transformative. It also identifies incentive types relevant to GEDSI objectives, including measures that encourage inclusive investor practices, strengthen participation of women-led, disability-led and underrepresented enterprises in local linkages, shape policy and regulatory frameworks, and build enabling systems for inclusive investment. The report concludes with practical actions for IPAs over immediate, medium-term and longer-term horizons, as well as opportunities for regional cooperation.